The British pound has bounced back on Friday after three losing sessions. GBP/USD is currently trading at 1.3395, up 0.21% on the day.
It’s up, up, up for US inflation. Headline CPI in October came in at 6.2% y/y and core inflation rose 4.6%, well above expectations. Inflation is red hot, as CPI hit its highest rate since November 1990 and core inflation at its highest since August 1991.
Investors eye BoE, Fed
It will be interesting to see how the Fed reacts to the latest inflation report. Will the Fed become more hawkish? Fed Chair Jerome Powell has insisted that the current bout of inflation is transitory, but with inflation only heading higher, this message is in danger of falling on deaf ears. The markets are becoming increasingly skeptical of the Fed’s guidance on rate policy and expect the Fed to bring forward its timeline for a rate hike. If inflation continues to climb, we can expect the Fed to become more hawkish – this could mean accelerating the timeline of the Fed taper in order to set the stage for an earlier than expected rate hike.
The BoE is under strong pressure to raise rates, especially after the bank stunned the markets in a non-move at last week’s policy meeting. The BoE had strongly hinted that it would raise rates in order to contain surging inflation, but the bank stayed on the sidelines and the pound took it on the chin as a result. Governor Andrew Bailey has said that a rate hike is coming, and there is a strong possibility that the bank will make good on this pledge at the December policy meeting. Still, investors will be exercising caution, with November’s shocker still fresh in everyone’s minds.
GBP/USD Technical Analysis
- There is weak support at 1.3381. Below, there is support at 1.3267
- There is resistance at 1.3654 and 1.3813
