GBP/USD looks to regain 1.2200 amid downbeat expectations from US inflation

GBP/USD looks to regain 1.2200 amid downbeat expectations from US inflation

  • GBP/USD picks up bids to snap two-day downtrend.
  • Fears from UK’s public sector workers’ strike challenge bulls despite broadly softer US Dollar.
  • Dovish Fedspeak, market’s optimism adds strength to Cable’s recovery moves.
  • US CPI for December will be crucial for near-term directions; softer print could add to weekly gains.

GBP/USD buyers flex muscles around the mid-1.2100s, following the downbeat performance in the last two days, as markets await the key US Consumer Price Index (CPI) for December during early Thursday. In doing so, the Cable pair remains well-set for the most significant weekly gains since late November.

The quote’s latest weakness could be linked to the likely increase in the UK’s economic hardships due to the fears emanating from the strikes of the British public sector workers. To solve the same, UK Prime Minister Rishi Sunak eased his front to come to a mid-point, but the situation didn’t improve, and the unions are warning over a much bigger protest starting from February 01. “Britain’s Public and Commercial Services (PCS) union said on Wednesday 100,000 of its members across 124 government departments would strike action on Feb. 1 in a dispute over pay, pensions and job security,” reported Reuters.

Elsewhere, the market’s cautious optimism amid the risk-positive headlines surrounding China and receding fears of hawkish Fed actions seemed to have kept the GBP/USD buyers hopeful.

Recently, Federal Reserve’s Boston President Susan Collins backed the smaller rate increases while stating that she leans at this stage to a 25 bps hike. However, she also mentioned that it is very data-dependent.

On the other hand, China’s total reopening and early signals of heavy holiday shopping join the chatters that the People’s Bank of China (PBOC) will adhere to rate cuts in 2023 to spread the Beijing-inspired optimism.

It should be noted that the firmer prints of equities and downbeat US Treasury yields also restricted GBP/USD downside despite not-so-positive headlines from the UK. That said, the US 10-year Treasury yields dropped nearly eight basis points (bps) 3.54% while Wall Street closed in the green.

Looking forward, GBP/USD traders will likely witness further recovery moves amid downbeat expectations from the US CPI data, expected at 6.5% YoY versus 7.1% prior. Analysts at Australia and New Zealand Banking Group (ANZ) said, “Current price action indicates that the market wants and expects a fairly benign data print. The consensus is that core CPI rose 0.3% m/m; we are forecasting 0.4% m/m.”

Technical analysis

Wednesday’s Dragonfly Doji and the GBP/USD pair’s ability to remain firmer past 21-DMA, around 1.2085 by the press time, keep buyers hopeful.

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Read More