GBP/USD Faces Selling Pressure Amid US Dollar Rebound
During European trading hours, GBP/USD is experiencing renewed selling pressure, pushing it towards the 1.2400 level. The pair is facing challenges due to a rebound in the US Dollar, driven by uncertainty surrounding the US debt ceiling and a cautious risk sentiment in the market. This uncertainty has revived the safe-haven appeal of the Greenback. From a technical perspective, as per our previous analysis, the price rebounded from the 61.8% Fibonacci level, indicating a potential setup for a new short position.
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The Consumer Price Index (CPI) provided by the Office for National Statistics serves as a gauge for tracking price fluctuations by comparing the retail prices of a representative selection of goods and services. Inflation exerts downward pressure on the purchasing power of the GBP. The CPI plays a crucial role in assessing inflation levels and shifts in consumer buying patterns. Typically, a higher CPI reading is viewed as favorable (or bullish) for the GBP, whereas a lower reading is perceived as unfavorable (or bearish).
UK's inflation has remained in the double-digit range for the past nine months, with labor shortages and high food inflation being identified as the main factors behind this persistent trend. The Brexit event has led to a decrease in job-seekers from the UK market, while some individuals have chosen early retirement. Efforts have been made by UK PM Rishi Sunak and UK FM Jeremy Hunt to discourage early retirement, but the impact of these measures will take time to materialize.
During a testimony on Tuesday, BoE Chief Economist Huw Pill acknowledged that the central bank underestimated the strength and longevity of UK inflation. He stated, "We are trying to understand why we have made errors in inflation forecasts." However, BoE policymakers remain confident that long-term inflation expectations have not deviated significantly from the target.
BoE Governor Andrew Bailey, in his testimony before the UK parliament's Treasury Select Committee (TSC), assured that declining gas prices and a slowdown in food price increases are exerting downward pressure on inflation. Additionally, private sector wages are not increasing as anticipated, which could dampen robust retail demand.
UK's inflation has remained in the double-digit range for the past nine months, with labor shortages and high food inflation being identified as the main factors behind this persistent trend. The Brexit event has led to a decrease in job-seekers from the UK market, while some individuals have chosen early retirement. Efforts have been made by UK PM Rishi Sunak and UK FM Jeremy Hunt to discourage early retirement, but the impact of these measures will take time to materialize.
During a testimony on Tuesday, BoE Chief Economist Huw Pill acknowledged that the central bank underestimated the strength and longevity of UK inflation. He stated, "We are trying to understand why we have made errors in inflation forecasts." However, BoE policymakers remain confident that long-term inflation expectations have not deviated significantly from the target.
BoE Governor Andrew Bailey, in his testimony before the UK parliament's Treasury Select Committee (TSC), assured that declining gas prices and a slowdown in food price increases are exerting downward pressure on inflation. Additionally, private sector wages are not increasing as anticipated, which could dampen robust retail demand.
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