GBP/USD rises towards 1.2700 ahead of UK CPI inflation data | 20 November 2024

Event to pay attention to today:

09:00 EET. GBP - Consumer Price Index

GBPUSD:

The GBP/USD currency pair has demonstrated a third consecutive session of strengthening, with trading near 1.2690 during Asian hours on Wednesday. The Pound Sterling (GBP) is strengthening as markets assess the likelihood of another rate cut by the Bank of England (BoE) this year at less than 20% following the release of the BoE's monetary policy report on Tuesday. In the report, the central bank described interest rates as 'moderately restrictive'.

On Wednesday, market participants will be monitoring the release of key UK data, including the Consumer Price Index (CPI) and Retail Prices Index (RPI) for October. The data may inform the Bank of England's (BoE) decision on whether to maintain its current rate cut trajectory.

The UK's Consumer Price Index (CPI) is forecast to show an increase from 1.7% to 2.2% year-on-year in October. The latest figures indicate that the monthly CPI for October is expected to increase by 0.5%, up from 0.0% in September. Furthermore, the Retail Price Index (RPI) is projected to have increased by 3.4%, up from 2.7% previously.

The US dollar (USD) remained static on Wednesday following three days of declines due to the release of weaker-than-expected economic data on Tuesday. However, the USD's decline may be limited as investors anticipate pro-inflationary policies, including tax cuts and tariff hikes, from the incoming Trump administration. These measures could result in higher inflation, which may prompt the Federal Reserve to slow the pace of rate cuts.

On Tuesday, Kansas City Fed President Jeffrey Schmid stated that he anticipates inflation and employment will approach the Fed's targets. Schmid elaborated that the rate cuts reflect the central bank's confidence that inflation will reach its 2% target. He also noted that while large budget deficits may not directly cause inflation, the Fed may need to respond to emerging inflationary pressures by raising interest rates.

Trading recommendation: We follow the level of 1.2700, when fixing above it we consider Buy positions, when rebounding we consider Sell positions.

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