The GBPUSD currency pair will continue to bounce around within its current range. See it oscillate between the 1.3400 and 1.3460 borders. The UK Consumer Price Index (CPI) shocked most analysts with an increase in inflation that was well above expectations. This unforeseen jump is now determining how the British pound will react to the US dollar. Although price has moved recently, GBPUSD has not made a major change in momentum, continuing to trend mostly sideways.
The newly published figures indicate that UK headline inflation jumped up to 3.4% on an annual basis in December. This was higher than forecasts of 3.3% and was an increase from November’s 3.2%. This increase in CPI has been key to changing market expectations and currency trading strategies.
Current Trading Range
The latest analysis indicates that GBPUSD has been oscillating in a more constricted range of between 1.3402 and 1.3458. As of yesterday, it was trading down to 1.3433, which is a small loss of 0.08%. Analysts warned that there’s been no change in downward or upward momentum for the pair.
“Yesterday, we expected GBP to ‘range-trade between 1.3420 and 1.3470’.” – Quek Ser Leang and Lee Sue Ann
Traders and investors have their eyes fixed on these levels, as a clean break above 1.3505 seems far-fetched anytime soon. Traders would do well to stay choppy as the pair persists to show this range-bound action.
Economic Factors Influencing GBPUSD
The recent inflation data released by the UK has got everyone’s attention. It has inspired a great deal of speculation on how this could influence the future course of monetary policy. This unexpected rise in the CPI is likely to make the Bank of England rethink its dovish pivot on interest rates. None of these things are likely to change any time soon.
In the longer run, analysts agree the near-term bias for GBPUSD is bullish. At the same time, they warn, large upward progress is limited by resistance levels still to be broken.
“There has been no shift in either downward or upward momentum, and we continue to expect range-trading today, most likely between 1.3400 and 1.3460.” – Quek Ser Leang and Lee Sue Ann
Future Outlook
Retail traders need to prepare for volatile action to continue inside the defined trading range. Forthcoming economic indicators may change market views even further. As we’ve seen recently, the ongoing interaction between UK economic data and wider market sentiment will be key to deciding the next moves in GBPUSD.