GBP/USD Fundamental Backdrop

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Cable is largely unchanged after yesterday’s close as markets remain apprehensive ahead of U.S. inflation data later today (see economic calendar below). With nothing scheduled for the UK today, CPI takes center stage with expectations at 8.7%. After reviewing the Cleveland Fed’s nowcast data, many economists are looking for an actual issue around the 9% mark which could see the dollar bid post-CPI. Last week’s stellar NFP print did not reveal itself in dollar price action and a upside surprise could definitely help dollar bulls claw back some lost gains this week.

GBP/USD Economic Calendar

Source: DailyFX Economic Calendar

The UK political dance has gained some attention overnight with Chris Skidmore switching sides from Rishi Sunak to Liz Truss on the basis that Mr. Sunak’s campaign seems to be lacking consistency. Furthermore, Liz Truss stated that she favors tax cuts as opposed to Mr. Sunak’s £15bn energy bill. The energy argument comes after yesterday’s statement by the Department of Business, Energy and Industrial Strategy outlining the potential for blackouts in homes and business under their “reasonable worst-case scenario”.

Technical Analysis

GBP/USD Daily Chart

Chart prepared by Warren Venketas, IG

GBP/USD price action reflects a cautious approach this week as investors look to U.S. CPI for forward guidance. We are seeing this across global markets so I expect an uptick in volatility pre and post announcement.

Key resistance levels:

• 1.2400
• 100-day EMA (yellow)
• 50-day EMA (blue)

Key support levels:

• 1.2080/20-day EMA (purple)
• 1.2000

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