GBP/USD holds above 1.35 after mixed inflation data
GBP/USD is holding above 1.35 amid a slightly softer US dollar and following mixed UK inflation data.
UK CPI rose 3.3% year-on-year in March, lifted by a surge in energy costs linked to the Iran conflict. This was up from 3% in February and in line with expectations. The increase was driven by an 8.7% jump in motor fuel prices—the largest rise since 2022 during the Russian invasion of Ukraine.
This also contributed to a rise in services inflation, which increased to 4.5% from 4.3%, partly due to volatile airfares.
However, core CPI, which excludes more volatile items such as food and fuel, unexpectedly fell to 3.1% from 3.2%. This supports the view at the Bank of England that it can keep rates on hold for now.
The data follows labour market figures released yesterday, which showed real wages are under pressure and firms are cutting jobs and slowing hiring. This suggests the market may be more hawkish than the data warrants.
Markets are currently pricing in one 25 basis point rate hike, with a roughly 50% chance of a second. Policymakers are expected to leave rates unchanged at the upcoming meeting on April 30 as they await greater clarity on the duration of the conflict. However, the central bank has indicated it is ready to act if higher energy prices lead to second-round inflation effects.
The US dollar is easing lower from a weekly high reached yesterday after Trump’s announcement that the ceasefire with Iran has been extended indefinitely. However, the US blockade on Iranian ports remains and the Strait of Hormuz is still shut.
The dollar is finding some support from Kevin Warsh’s Senate Banking Committee hearing, which was viewed as slightly more hawkish. Stronger-than-expected US retail sales have also provided support to the dollar.
GBP/USD forecast – technical analysis
GBP/USD rebounded from the 1.32 support zone, breaking out of its falling channel, above its 200 and 50 SMA to a peak of 1.36. From here, the price has eased back to consolidate above 1.35.
Buyers, supported by the RSI above 50, will look to extend the bullish move by rising above 1.36, the April high, towards 1.37, the round number, and 1.3870, the 2026 high.
Sellers will need to break below 1.35 support to expose the 200 SMA at 1.3410, and below here, 1.3340 comes into play, the January low.
DAX rises after Trump extends the Iran ceasefire indefinitely
The DAX, along with its European peers, is rising on Wednesday as markets respond positively to Trump’s announcement of an indefinite ceasefire with Iran, as well as a fresh batch of earnings reports.
Sentiment is improving as investors react to the latest developments in the Middle East, although geopolitical uncertainty remains. The US is maintaining its blockade on Iranian ports, and the Strait of Hormuz is still closed to maritime traffic. As a result, further declines in oil prices may be limited. While oil continues to trade below $100 per barrel, a sustained drop would likely require the strait to reopen and supply to increase.
Earnings are also providing support. ASM International has jumped over 8% after forecasting stronger-than-expected second-quarter revenue. A solid rebound in tech stocks in recent sessions has helped support the broader market, which had been weighed down by ongoing geopolitical tensions.
The Eurozone economic calendar is quiet today. Attention will turn to PMI figures tomorrow.
DAX forecast - technical analysis
The DAX recovered from the 21,860 low, rising above the 200 SMA and multi-month rising trendline to a peak of 24,800, before easing back below the trendline to test support at the 200 SMA. The price is again attempting a rise above the trendline resistance.
Buyers, supported by the RSI above 50, will look to extend gains above the rising trendline and 24,800. A rise above here creates a higher high and brings 25,000 into focus.
Support is at 24,100, the 200 SMA and 24,000. A break below here opens the door towards 23,400, the April 13 swing low.
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