The Pound Sterling (GBP) is trading in a relatively narrow range near 1.2750 against the US Dollar (USD) as investors direct their attention towards the US Consumer Price Index (CPI) data for November, which is set to be released on Wednesday.
Economists anticipate that the annual headline inflation will have picked up to 2.7% from the 2.6% recorded in October. During the same period, the core CPI, which excludes volatile food and energy prices, is expected to have seen a steady increase of 3.3%. Month-on-month, the headline and core CPI are estimated to have grown by 0.2% and 0.3% respectively.
Unless there are significant deviations from these expectations, the US inflation data is unlikely to bring about major changes to market expectations regarding the Federal Reserve’s (Fed) potential interest rate actions in its policy meeting on December 18. Recent remarks from several Fed officials have shown their confidence that inflation is on a sustainable path towards the bank’s target of 2%. However, Fed Governor Michelle Bowman, known for her hawkish stance, stated on Friday that the central bank should “proceed cautiously and gradually in lowering the policy rate, as inflation remains elevated.” According to the CME FedWatch tool, there’s nearly a 90% probability that the Fed will reduce interest rates by 25 basis points (bps) to a range of 4.25% – 4.50%.
In Tuesday’s session, investors will also keep an eye on the Q3 Unit Labor Costs data, which will be published at 13:30 GMT. This economic data will reveal the total cost incurred by employers for employing the workforce, and it’s estimated to have grown steadily by 1.9% compared to the previous quarter.
Daily Digest of Market Movers:
On Tuesday, the Pound Sterling is gaining ground against its major counterparts during a week with a relatively light economic calendar in the UK. Investors are growing more confident that the Bank of England (BoE) will maintain the interest rate unchanged at 4.75% in its monetary policy meeting on December 19.
Most BoE officials are likely to vote in favor of keeping the interest rate steady, given that the UK headline inflation has started to rise again after dropping below the bank’s 2% target. The BoE had previously projected that inflation would rebound after entering its desired range, indicating that more efforts are needed to bring it down in a sustainable manner.
Later this week, investors will turn their focus to the UK’s monthly Gross Domestic Product (GDP), as well as Industrial and Manufacturing Production data for October. These figures will offer insights into the current state of the UK’s economic health. Economists expect the factory and GDP data to show expansion after declining in September.
Technical Analysis:
The Pound Sterling is aiming to regain the key resistance level of 1.2800 against the US Dollar. The GBP/USD pair is currently supported by the 20-day Exponential Moving Average (EMA) around 1.2720.
The 14-day Relative Strength Index (RSI) is fluctuating within the 40.00 – 60.00 range, suggesting that the pair is in a sideways trend.
Looking at the downside, the pair is expected to find support near the upward-sloping trendline around 1.2500, which was plotted starting from the October 2023 low near 1.2035. On the upside, the 200-day EMA around 1.2830 will serve as a significant resistance level.
Related topics:
INR Slips, USDINR Ascends on Growth Concerns
GBP/USD Maintains Stability Above 1.2700 Amid Cautious Sentiment
Crude Oil Surges Past $70 Amid OPEC+ Speculations and Geopolitical Tensions
