- The GBP/USD has collapsed on Thursday, down over 1.2% from the day's earlier highs.
- The Pound Sterling has turned red on the week against the US Dollar in safe-haven flows.
- Investors are fleeing riskier assets as markets fear the Fed sticking to a higher-for-longer rate cycle for even longer.
The GBP/USD has plunged 1.2% from Thursday's peaks, dropping into 1.2180 after the US Consumer Price Index (CPI) inflation reading broadly beat market expectations, and investors are concerned that the Federal Reserve (Fed) will get pushed further into a high-for-longer rate hike cycle.
US CPI inflation holds steady at 3.7% in September vs. 3.6% forecast
The US CPI inflation reading has sent investor sentiment into the floorboards, dragging risk assets down as traders brace for possible further rate hikes from the Fed. With US inflation continuing to beat market estimates and investors vexed by CPI growth that refuses to decline as quickly as market participants would like, fears are re-emerging that the Fed's "dot plot", or expectations of when rates will finally begin to see cuts, will get pushed even further over the horizon.
Markets are broadly expecting a half-percent rate cut sometime before the end of 2024, but if inflation continues to climb over forecasts, the chances of future rate cuts from the Fed will begin to dwindle rapidly.
Despite the broader market's focus on US CPI inflation figures, UK economic data failed to inspire confidence in the Pound Sterling (GBP) on Thursday.
UK Manufacturing and Industrial Production broadly missed the mark early Thursday, with Manufacturing Production declining 0.8% in August against the forecast -0.4%, failing to meaningfully recover from the previous month's -1.2%.
Industrial Production for the same period likewise missed estimates, printing at -0.7% and flubbing the -0.2% forecast, with the previous reading of -1.1% getting revised downwards from -0.7%.
UK Gross Domestic Product (GDP) for August came in at 0.2%, matching estimates, but the previous month was revised downwards from -0.5% to -0.6%.
GBP/USD Technical Outlook
The Pound Sterling is steeply down for Thursday, dropping into 1.2170 and testing the region below the 200-hour Simple Moving Average (SMA), and the US CPI data beat saw the GBP/USD make a clean shear of the 50-hour SMA just below the 1.2300 handle.
The week's lows sit near 1.2160, and a continued decline into the Thursday market close will see the Pound Sterling etch in a new low for the week beyond that level.
Daily candlesticks see the GBP/USD snapping a six-day winning streak, and the pair has slipped to the 50% retracement level of the last upswing from recent lows near 1.2037.
A bearish continuation will see the GBP/USD slipping even further from the 200-day SMA near 1.2443, and the 50-day SMA is geared for a bearish crossover of the longer moving average.
GBP/USD Hourly Chart
GBP/USD Daily Chart
GBP/USD Technical Levels
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
Australian Dollar appreciates despite stronger US Dollar, PMI awaited
The Australian Dollar (AUD) continues to strengthen against the US Dollar (USD) following the release of mixed Judo Bank Purchasing Managers' Index (PMI) data from Australia on Friday. The AUD also benefits from a hawkish outlook by the Reserve Bank of Australia (RBA) regarding future interest rate decisions.
Japanese Yen remains on the front foot against USD, bulls seem non-committed
The Japanese Yen (JPY) attracts some buyers for the second straight day on Friday amid reviving bets for more interest rate hikes by the Bank of Japan (BoJ), though it lacks any follow-through.
Gold advances to near two-week high, eyes $2,700 on geopolitical tensions
Gold price (XAU/USD) prolongs its uptrend for the fifth consecutive day on Friday and climbs to a nearly two-week top, around the $2,690-2,691 area during the Asian session. Intensifying Russia-Ukraine tensions force investors to take refuge in traditional safe-haven assets and turn out to be a key factor underpinning the precious metal.
Ethereum Price Forecast: ETH open interest surge to all-time high after recent price rally
Ethereum (ETH) is trading near $3,350, experiencing an 10% increase on Thursday. This price surge is attributed to strong bullish sentiment among derivatives traders, driving its open interest above $20 billion for the first time.
A new horizon: The economic outlook in a new leadership and policy era
The economic aftershocks of the COVID pandemic, which have dominated the economic landscape over the past few years, are steadily dissipating. These pandemic-induced economic effects are set to be largely supplanted by economic policy changes that are on the horizon in the United States.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.