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The GBP/USD is on track for the third week of losses as investors reacted to the latest UK consumer price index (CPI) data. The pair plunged to a low of 1.2341, the lowest level since May 22nd. It has plunged by almost 6% from the highest point this year.
UK inflation, BoE, and Fed decision
The GBP/USD exchange rate has been in a strong bearish trend in the past few weeks. This sell-off gained steam after the UK published the latest UK CPI data. In a report, the Office of National Statistics (ONS) said that the country’s inflation dropped from 6.8% in July to 6.7% in August. This decline was deeper than the median estimate of 6.8%.
Core inflation dropped from 6.9% to 6.2%, lower than the median estimate of 6.8%. It dropped from 0.3% in July to 0.1% in August. Still, analysts believe that inflation will resume rising now that natural gas and crude oil prices are rising. Also, this inflation is much higher than the Bank of England (BoE) target of 2.0%.
The next key catalyst for the GBP/USD pair will be the upcoming interest rate decision by the Federal Reserve. Economists believe that the Fed will decide to leave rates unchanged between 5.25% and 5.50%.
The Fed is battling several important concerns. For example, there are signs that inflation has been rising recently. It rose by 3.7% in August after it rose by 3.2% in the previous month. Crude oil price is rising, the UAW strike is going on, while a traffic jam in the Panama Canal is continuing.
Watch here: https://www.youtube.com/embed/THahdLc-bzU?feature=oembedThe other crucial GBP/USD news will be the upcoming Bank of England (BoE) decision. Like the Fed, economists believe that the bank will decide to leave rates unchanged on Thursday.
GBP/USD technical analysis
The daily chart shows that the GBP/USD pair has been in a strong bearish trend in the past few weeks. It has dropped below the 23.6% Fibonacci Retracement level. Most importantly, the pair has dropped below the 50-day and 200-day moving averages. The two averages are about to make a death cross when the two averages cross each other.
The pair will likely continue falling in the coming days as sellers target the key support at 1.200, a few points above the 38.2% retracement point. The stop-loss of this trade is at 1.2500.
The post GBP/USD forecast: signal ahead of the Fed and BoE decisions appeared first on Invezz
