The GBP/USD currency pair, commonly referred to as ‘Cable’, has recently been oscillating within a relatively tight trading range. It trades under both the 50-day and 200 day Exponential Moving Average (EMA). The pair today trades at about 1.3150. Instead, after a sharp bounce from seven-month lows, it has reversed and is losing steam again. Further ahead, investors are preparing for the UK Consumer Price Index (CPI) release on October 17. Clearly, the mood of buyers and sellers in the market is one of concern.
The Pound Sterling (GBP) is the official currency of the United Kingdom and its territories. Considered the oldest continuously used currency still in circulation since 886 AD, it is one of the most traded currencies in the global foreign exchange markets. Indeed, it accounts for only 11% of all foreign exchange flows. As a result, it is the fourth most traded currency in the world, with daily transaction volumes exceeding $630 billion as of 2022.
Current Market Conditions
Given that GBP/USD sits just above its early November low around 1.3010, forex traders are especially focused on how the exchange rate performs near this key level. The two have had a hard time keeping upward momentum, resulting in a lack of confidence from traders. Yet the recent rebound from the seven-month lows has failed to generate follow-up buying conviction. So, somewhat unexpectedly, the duo arrives at a crossroad.
Neither the bulls nor bears have shown much conviction to drive the pair either way. The uncertainty is palpable as market observers await vital economic data that could influence the Pound’s performance against the US Dollar. Investors are holding back considering the current levels of trading. This action points to a broader cautious sentiment in the FX landscape.
Anticipation for CPI Data
Investors have been waiting for the next CPI inflation print for October, which will come early in November. They find a small increase, between 0.0% and 0.4%. That expected jump is fueling a tidal wave of enthusiasm for the GBP. This could help strengthen its value relative to the US Dollar. Core CPI is expected to tick down from 3.5% to 3.4% for the year ending in October. At the same time, headline CPI is projected to continue receding, falling to 3.6%, down from 3.8%.
The overall impact of these figures could be quite bullish for the GBP/USD pair. Conversely, a stronger than expected CPI reading would likely boost the Pound, driving it back into the vicinity of the recent swing area just above 1.3200. If traders are left unsatisfied by the data, they could be drawn back down towards the prior low around 1.3010. This realignment will make them much more careful.
Market Outlook
Traders are making the wrong call at this moment in history. They’re intently observing if GBP/USD breaks above recent resistance or retreats back to lower support levels. The next print of the CPI data is to be the most important catalyst for future price action in this key currency pair.
Now picture all those funding streams from above. As one of the most important trading pairs in the FX world, any drastic movements in GBP/USD value can shake all financial markets. Investors are keenly aware that fluctuations in this pair can indicate broader economic trends and sentiment regarding the UK economy.