Will inflation keep posing a problem?

Today’s CPI came worse than expected and lower than the previous month. The monthly inflation was 0.1% vs 0.3% expected and 0.4% reported in the previous month, while the yearly inflation came at 7.1%, with expectations of 7.3% and reading from the previous month at 7.7%. The reaction on the market was straightforward – the dollar weakened and the stocks gained.

Yesterday we received a substantial pack of data from the UK where the GDP, industrial and manufacturing productions came better than expected, which positively influenced the British Pound. As of now, there is no negative sentiment for the USD and no positive one for the GBP. One might guess that GBPUSD should be currently trading higher and that is, indeed, the case right now.

With today’s upswing, GBPUSD has reached the highest levels since June 2022. The recent bullish trend was very technical as well. The price created three rectangles (blue lines) and each one was smaller than the previous one. The post-CPI rise came right on time as the price was at the end of the last triangle and above the major up trendline (red).

On the cable, we do have a proper buy signal and the positive sentiment will stay as long as the price remains above the red line. The price going below it will be an immediate sell signal but chances for that are now rather limited.