GBPUSD has rebounded towards the 1.25000 level following the higher-than-expected UK Inflation reading.
- Core CPI (YoY): 4.2% vs 4.1% expected
- Headline inflation (YoY): 3.2% vs 3.1% expected
Despite the deviation from the market’s expectations, both Core and headline CPI fell (YoY) from 4.5% and 3.4% respectively.
A decrease was primarily driven by the slowdown in food prices (4.0% in March vs 5.0% in February).
Higher-than-expected reading may have the possibility to affect the timing of the first highly anticipated interest rate cuts.
The markets now imply only a ~25% chance of rate cuts in June.
However, with the US inflationary pressures still present, potentially leading for higher rates remaining for a longer period, GBPUSD may experience the downside pressure.
From the technical perspective …
- GBPUSD is trading below the key simple moving averages (21, 50 and 100-period SMAs), underscoring the potential downtrend
- Relative strength index (RSI) is located at the bottom of the range at ~37.55 but remaining in the neutral area (<30 – oversold, >70 – overbought)
- To the upside the 1.25000 may act as a key resistance – target level for the GBPUSD bulls, while to the downside the 1.24020 may provide an immediate support if the USD bulls try to regain the momentum
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