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The Friday Overview
On Friday, the GBP to USD pair slipped by 0.06%. Following a 0.28% loss on Thursday, the GBP/USD ended the week down 0.97% to $1.24641. A mixed session saw the pair rise to a high of $1.25142 before falling to a low of $1.24510.
BoE Chief Economist Huw Pill in the Spotlight
While a softer dollar offered GBP to USD support this morning, the macroeconomic backdrop remains bearish for the Pound.
Last week, Bank of England Governor Andrew Bailey erased bets on further BoE rate hikes. The BoE Governor stated inflation would soften significantly before the end of the year, removing the need for further hikes.
Bank of England Chief Economist Huw Pill speaks today. Comments relating to inflation, the UK economy, and monetary policy will resonate. However, Pill would need to deviate from the script to impact bets on BoE monetary policy.
US Consumer Inflation Expectations in Focus
This afternoon, US inflation figures kickstart another important week for the dollar. US Consumer Inflation Expectation figures for August need consideration. While official CPI numbers are out on Wednesday, the market interest in inflation will give today’s report more weighting than usual.
Economists forecast Consumer Inflation Expectations to soften from 3.5% to 3.4%. Cooler-than-expected numbers would offer brief support to the GBP/USD pair.
Short-Term Forecast
Downside risks linger for the GBP to USD, with sticky US inflation figures likely to cement a final Fed rate hike. In contrast, UK economic woes and easing bets on further BoE policy tightening leave Pound on the defensive.
GBP to USD Price Action
Daily Chart
The GBP/USD pair sat below the trend line. However, the GBP/USD broke out from the 200-day EMA this morning to bring $1.26 into play. BoE Chief Economist Huw Pill must leave rate hikes on the table to support a return to $1.26.
Dovish chatter and hotter-than-expected US inflation numbers would reverse early gains. A fall through the 200-day EMA would bring the $1.24410 support level and sub-$1.24 into play.
The 14-Daily RSI reading of 39.88 indicates the GBP/USD pair can fall through the $1.24410 support level before entering oversold territory.
4-Hourly Chart
The GBP/USD sits below the 200-day and 50-day EMAs, reaffirming bearish price near-term signals. A GBP/USD move through $1.2550 would give the bulls a run at the 50-day EMA. However, BoE commentary must support hawkish bets to fuel a sustained GBP/USD breakout.
Hotter-than-expected Consumer Inflation Expectation figures would bring sub-$1.25 and the $1.24410 support level into play.
The 50.73 14-4-Hourly RSI shows the GBP/USD can test the 50-day EMA before entering overbought territory.
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