• The US Producer Price Index (PPI) for June rose below estimates, suggesting a steady deceleration of inflation in the US.
  • Initial Jobless Claims in the US were lower than estimated, although the focus remains on the Fed’s inflation targets.
  • The UK missed a recession, though fears reignited as the Bank of England is expected to tighten monetary conditions.

GBP/USD rallies past the 1.3100 mark and is gaining close to 1% on Thursday, as overall US Dollar (USD) weakness extended amid speculations the Federal Reserve (Fed) is closing to finishing its tightening cycle after June’s PPI and CPI data was softer than expected. The GBP/USD is exchanging hands at 1.3111 after hitting a daily low of 1.2979.

Rising speculations of Fed’s tightening cycle ending spurs Sterling gains

GBP/USD accelerated its gains after the US Bureau of Labor Statistics (BLS) revealed that prices paid by producers, also known as the Producer Price Index (PPI) in June, rose below estimates, suggesting the deflation process in the US is gathering pace. PPI rose by 0.1% YoY, below forecasts of 0.4%, down ticked from May 1.1%. Core PPI, which strips volatile items, showed signs of losing steam and expanded at a 2.4% YoY pace, below estimates of 2.6% and the previous month’s 2.8%.

At the same time, the BLS informed that Initial Jobless Claims for the week ending July 5 climbed less than estimates of 250K, standing at 237K. Even though the data portrays a tight labor market, investors ignored it, as the Fed’s primary focus remained on inflation.

Despite the inflation downtrend continuing, the Federal Reserve is estimated to raise rates by 25 bps at the upcoming July meeting. However, bets for the rest of the year, paired as shown by November’s odds standing at 21%, according to CME FedWatch Tool.

On the UK front, the UK economy dodged a recession, as UK’s GDP growth for the last 3-months came at 0%, while month-over-month (MoM) figures in May dropped -0.1%, trailing April’s 0.2% expansion. Although the economy didn’t grow, concerns of a recession loom, as the Bank of England (BoE) is set to tighten monetary policy to curb high inflation at 8.6 percent levels.

GBP/USD Price Analysis: Technical outlook

GBP/USD Daily chart

the GBP/USD is set to test the 2021 yearly low of 1.3160 after storming through the 1.3000 figure, which didn’t last long enough, to refrain buyers from committing to open fresh long bets, that Sterling (GBP) would continue to edge higher. A decisive break above the former could put the 1.3200 figure on the table; otherwise, a healthy correction could send the pair dipping towards the 1.3100 psychological level before diving to July 12 daily high at 1.3000. Of note, the Relative Strength Index (RSI)  is at overbought conditions, still shy of reaching the 80 levels, usually used as the extreme overbought area, after an asset witnessed a strong uptrend.

GBP/USD

Overview
Today last price 1.3123
Today Daily Change 0.0136
Today Daily Change % 1.05
Today daily open 1.2987
 
Trends
Daily SMA20 1.2764
Daily SMA50 1.2599
Daily SMA100 1.2438
Daily SMA200 1.2181
 
Levels
Previous Daily High 1.3001
Previous Daily Low 1.2904
Previous Weekly High 1.285
Previous Weekly Low 1.2659
Previous Monthly High 1.2848
Previous Monthly Low 1.2369
Daily Fibonacci 38.2% 1.2964
Daily Fibonacci 61.8% 1.2941
Daily Pivot Point S1 1.2927
Daily Pivot Point S2 1.2867
Daily Pivot Point S3 1.283
Daily Pivot Point R1 1.3024
Daily Pivot Point R2 1.306
Daily Pivot Point R3 1.312

 

 

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