- Sterling’s reversal finds support at 1.3745 before recovering above 1.3800.
- The pair wobbled after weaker-than-expected UK inflation data.
- GBP/USD approaching key resistance at 1.3910/30 – SocGen.
GBP has resumed its uptrend on Wednesday to resume the rally of the past two weeks after a corrective reversal seen during the European session. GBP/USD has found buyers at 1.3745, to bounce again during the US trading time and return above 1.3800. Just a few pips below one-month highs at 1.3835.
UK inflation figures weigh on sterling.
According to National Statistics data released today, UK CPI accelerated to an annual pace of 3.1%. Additionally 0.3% in the month of September, disappointing expectations for increases of 3.2% and 0.4%, respectively. These figures have dampened expectations of higher consumer inflation, which puts pressure on the Bank of England to accelerate its monetary normalization program.
The rising energy prices have pushed consumer prices well above the Bank of England’s price stability target. Then causing Bank of England officials, including Governor Andrew Bailey, to suggest that accelerating the monetary policy normalization plan could boost the pound’s recovery from the end of September.
Sterling’s weakness, however, has been short-lived, and the risk-sensitive pound has been boosted by positive market sentiment. A quarter’s worth of strong earnings from the healthcare sector has extended the risk-off mood seen on Tuesday, fading concerns about higher prices and supply chain disruptions, ultimately weighing on dollar demand as a safe-haven.
GBP/USD should break 1.3910/30 to see further appreciation – SocGen
From a technical perspective, Société Générale’s FX analysis team warns of a key resistance area at 1.3910/30. “GBP/USD is approaching the potential hurdle at 1.3910/1.3930 which represents the recent peak and 61.8% retracement since June. Overcoming this resistance area would be crucial for the next bounce leg (…) Failure to regain the 1.3910/1.3930 area may lead to a short-term pullback. 1.3670 and last week’s low of 1.3570 are short-term supports.”