GBP/USD slides amid US inflation concerns, mixed UK economic outlook
|- GBP/USD drops more than 0.50%, reacting to US data indicating ongoing inflation struggles and a cooling job market.
- US University of Michigan report shows increased short-term inflation expectations, while consumer sentiment dips below expectations.
- UK's Autumn Statement focuses on debt reduction and inflation control, with modest GDP growth projections, weighed on the Pound Sterling.
The GBP/USD tumbles during the mid-North American session after economic data from the United States (US) suggested the battle against inflation is not done while the economy continues to decelerate, as sought by the US Federal Reserve (Fed). At the time of writing, the pair is trading at 1.2456, losing 0.63%.
Sterling falls as US inflation expectations rise and UK Chancellor's Autumn Statement reveals cautious growth projections
A report by the University of Michigan (UoM) witnessed that inflation expectations in the US rose for one year to 4.5% from 4.4% in the previous report, while it stood at 3.2% for a five-year period. Regarding consumer sentiment, Americans remain pessimistic as the index dropped from 63.8 to 61.3 but exceeded forecasts.
Additional data from the US showed that unemployment claims fell last week compared to two weeks ago, suggesting the jobs market is cooling. At the same time, the US Census Bureau showed that Durable Goods Orders plummeted as demand for business equipment slowed.
The US Dollar Index (DXY), which tracks the performance of six currencies vs. the Greenback, rose sharply by 0.49% and sits at 104.10, underpinned by higher US Treasury bond yields, as a reaction to the UoM inflation expectations poll.
Across the pond, Jeremy Hunt, the UK Chancellor of the Exchequer, revealed its Autumn Statement. He stated, “We will reduce debt, cut taxes, and reward work.” He emphasized that it would work alongside the Bank of England to get inflation to its 2% target, which, according to the Office for Budget Responsibility (OBR) would be attained in 2025.
The Office for Budget Responsibility (OBR) says the combined impact of these measures will reduce inflation and raise GDP. Nevertheless, Hunt added that Gross Domestic Product (GDP) is expected to grow by merely 0.7%, compared with the 1.8% forecast in the previous projection in March from the OBR.
GBP/USD Price Analysis: Technical outlook
The GBP/USD remains bullish according to the daily chart, though is about to test key support seen at the 200-day moving average (DMA) at 1.2448, which once cleared, could open the door for further losses. The next support would be the 1.2400 figure, followed by the November 17, the latest cycle low at 1.2374. A decisive break would put into play the 50-DMA at 1.2256. On the flip side, if buyers reclaim 1.2500, they could remain hopeful of higher prices, with the first resistance level at 1.2559, the November 21 high.
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