The United Kingdom CPI for the month and year ending in April came in higher than expected, giving the Sterling a significant boost. According to the Reuters BOEWATCH tool, chances have dipped significantly for June rate cuts.
Key Points
- UK CPI was released earlier today and comes in above expectation, reducing June rate cut predictions.
- United States FOMC Meeting Minutes to be expected later.
- The 1.27250 remains a key level for the pair.
GBP/USD Daily Price Analysis – 22/05/2024
It was a fairly balanced tussle between the Sterling and the Greenback on Tuesday. The former barely came out on top by 0.03%. After the release of the UK CPI in the early trading hours of Wednesday, however, the GBP has gained a further 0.13% on the USD after having first risen by 0.41%
The United Kingdom inflation report came earlier today at 2.3% for the year that ended in April, higher than the expected 2.1%. And for the month that ended at the same time, it increased to 0.3% from 0.2%. As a result, chances of a June rate cut from the BoE have dipped, giving the Sterling a boost. In the hour after the news release, the GBP gained a significant 0.36% against the USD. Since then, though, most of the gains have been lost to the resilient Greenback.
According to the Reuters BOEWATCH tool, the chances of a June rate cut by the BoE, which were 50% before the release of the data, have now dipped to 14%. Notably, though, these figures were lower than last year’s 3.2% and last month’s 0.6%, so rate-cut bets in 2024 aren’t completely off the table yet.
Across the pond, the Greenback may get a chance at a comeback if we learn anything new from the FOMC Meeting Minutes set to be released a few hours from now. Nevertheless, investors aren’t expecting much from it, as the meeting was held before the release of the most recent US Inflation data.
From the technical magnifying glass, the GBP rally remains largely untroubled after the price crossed the 50 EMA to the upside on the 14th of May. The Relative Strength Index also shows that the strength of the GBP isn’t slowing as the indicator line slowly crawls higher.
GBP/USD Technical Analysis – 22/05/2024
On the hourly chart, the pair has broken out of the range that was capped between 1.27250 resistance and 1.26900 support. It’s currently making a retracement to the resistance, which has now turned into support. If this support holds the price, the most recent high of 1.27614 becomes the first target. Further above is the 1.28035 high from the 21st of March.
Should this support prove too weak, though, another support rests not too far away at 1.27095. For this to happen, though, we might need to breach the 50 EMA to the downside, bringing the price into bearish purview. Then, the price will have the 1.26800 and the 1.26496 as the most immediate support levels.
Key Economic Data and News to Be Released Today
The United Kingdom CPI report snatched the headlines in the Londing AM session of Wednesday, infusing some long-awaited volatility in the pair. The US FOMC minutes from the last meeting will also be released later today, which may bring some more volatility to the pair. But before that, we’ll have the Existing Home Sales and Crude Oil Inventories report from the United States.
GBP/USD Key Pivot Point Levels 22/05/2024
Based on the 1hr chart, the key Pivot Point levels for the GBPUSD are these:
| S2 | S1 | P | R1 | R2 |
| 1.26672 | 1.26881 | 1.27074 | 1.27283 | 1.27476 |
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