GBP Weakening 

GBP looks to be under pressure at the start of the week following on from the selling we saw last week. Despite the NIESR reporting that it no longer expects the UK to suffer a recession this year, the economy (seen flat in Q4) is still reeling from the ongoing political uncertainty and cost of the living crisis gripping the UK. With the BoE having hiked rates to their highest levels in 14 years, with some in the BoE suggesting further hikes will still be needed, this week’s UK CPI release will draw plenty of attention.
 

Inflation & BoE 

The market is looking for headline CPI to have cooled to 10.3% from 10.5% prior. Similarly, core inflation is forecast to fall to 6.2% from 6.3%. While both data sets, if confirmed, would still be well above the BoE’s 2% target, signs that inflation is continuing to cool would no doubt be welcomed by the BoE. Indeed, if we see any downside surprise, this might well reinforce the view that the BoE will look to pivot on rates at the next meeting, which should see GBP coming under fresh selling pressure this week. Obviously, any upside surprise would be a major upset, but for now, the better opportunities look to be to the downside in GBP.
 

Technical Views

GBPCAD

(Click on image to enlarge)

The correction lower in GBPCAD has been framed by a contracting triangle pattern, underpinned by support at the 1.6109 level. Price is now testing that level once again and looks vulnerable to a fresh break lower with 1.5744 the next downside target on a break of current lows. 

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