• The Pound Sterling surged to near 1.3180 against the US Dollar as UK core inflation rose more than anticipated in August.
The Pound Sterling (GBP) strengthened against its major counterparts during Wednesday’s London session after UK inflation data for August exceeded expectations. The Office for National Statistics (ONS) revealed that core Consumer Price Index (CPI), which excludes volatile items like food, energy, oil, and tobacco, rose by 3.6%, surpassing the estimated 3.5% and up from 3.3% in July.
Services inflation, a key indicator for Bank of England (BoE) officials, surged to 5.6% from 5.2% in July. This spike in inflation may prompt traders to reconsider expectations of an additional interest rate cut from the BoE later this year.
Meanwhile, headline inflation increased by 0.3% month-on-month and 2.2% annually, aligning with analysts’ predictions. Looking ahead, attention will shift to the BoE’s monetary policy announcement on Thursday. Prior to the inflation data, markets anticipated the BoE would keep rates steady at 5%. However, with inflation persisting, expectations for rates staying unchanged through year-end may rise.
• The Pound Sterling (GBP) surged to near 1.3170 against the US Dollar (USD) following the release of hotter-than-expected UK inflation data for August. The GBP/USD pair is aiming to break through the immediate resistance level of 1.3200. Volatility is expected as the Federal Reserve’s (Fed) monetary policy decision is set to be announced at 18:00 GMT.
Technical Analysis: Pound Sterling Reclaims 1.3200
The Pound Sterling (GBP) approaches the 1.3200 mark against the US Dollar (USD) during European trading hours, maintaining a firm near-term outlook as it holds above the 20-day Exponential Moving Average (EMA) around 1.3100. The pair strengthened after bouncing back from a corrective move near the trendline drawn from the December 28, 2023 high of 1.2828, showing a sharp rally post-breakout on August 21.
The 14-day Relative Strength Index (RSI) stands at around 60, signaling the potential for renewed bullish momentum if the oscillator continues to hover near this level.
On the upside, resistance is expected near the August 27 high of 1.3266 and the psychological barrier of 1.3500. To the downside, support is seen at the key psychological level of 1.3000.
