Indeed, the Pound Sterling has made further inroads against the US Dollar, strengthening above 1.3330 in Friday’s European session. The US Dollar Under Pressure from Disappointing Economic Data Specifically, the exceedingly weak Producer Price Index (PPI) report for April is fanning these inflationary flames. In forex, the GBP/USD has exploded past USD 1.3300. More recently, this increase has been driven by the prevailing optimism about the UK’s economic prospects.
The British pound sterling has been on a recent upward path. This increase is driven by vigorous underwriting following the release of the UK’s monthly and quarterly Gross Domestic Product (GDP) information. The GDP artificial intelligence is emerging as one of the most important gauges of UK economic activity. The Office for National Statistics, who puts together the figures, releases their monthly and quarterly figures on a public facing dashboard. The quarterly (QoQ) reading measures all economic activity in the reference quarter with that of the prior quarter. Today’s analysis provides us with a clearer picture of the health of our economy.
On Friday the GBP/USD pair skyrocketed above the 1.3300 level. It succeeded at not going below the 20-day Exponential Moving Average (EMA) at around 1.3256. This technical indicator would suggest that the pair has room to continue rising. It’s increasingly likely to build upside momentum as it approaches a three-year high at 1.3445. Looking ahead, the psychological level of 1.3000 should provide a key support zone for GBP/USD traders.
Elsewhere, the US Dollar Index (DXY) fell to 100.50 area. Investors are increasingly focused on what economic data may influence the Bank of England’s monetary policy going forward. Market participants all around the globe are holding their breaths as they await the release of April’s Consumer Price Index (CPI) data. This crucial data is slated for publication next week. This release gives us a look at the direction of inflation right now. It equally provides fresh food for thought with respect to the Bank of England’s (BoE) monetary policy direction.
Similarly, GBP/USD’s 14-day Relative Strength Index (RSI) has changed between 40.00 and 60.00. This suggests that there can be no overbought or oversold conditions at present for the currency pair under consideration. This sanguine state of play makes way for even more possible volatility as market players gauge what’s to come in terms of economic data released.
Huw Pill, Chief Economist at the Bank of England, recently sounded alarm bells over long-term shifts in price- and wage-setting patterns.
“I remain concerned that we have seen a sort of structural change in price and wage-setting behaviour, maybe driven by the type of things that were involved in models of the inflation process from the ’70s and ’80s.” – Huw Pill
The hype factor for this CPI data is off the charts. Provisionally, it would bring down the value of the Pound Sterling, negatively affecting the sentiment of investors toward UK equities and bonds. Analysts are anticipating that any very strong CPI print would likely lift the Pound substantially. A disappointing number could add some turbulence to the market.