GBP/USD Return to $1.1650 US Data Dependent with Inflation in Focus

It is a quiet day for the GBP/USD. According to the economic calendar, there are no UK economic indicators for the markets to consider.

With no economic indicators for the markets to consider, UK politics and Bank of England monetary policy will remain the focal points. Bank of England Chief Economist Huw Pill spoke on Tuesday about the need for more monetary policy tightening through rate hikes to tackle inflation.

Forward guidance from the Chief Economist suggests that the BoE will continue pushing rate hikes irrespective of the economic environment.

As the markets await the Autumn budget, tomorrow’s GDP report will set the tone for the BoE and give the UK Government a taste of what it faces in the coming quarters.

However, no Monetary Policy Committee members are due to speak ahead of tomorrow’s report. While there are no speeches on the Bank of England calendar, investors need to monitor chatter with the media.

GBP/USD Price Action

At the time of writing, the Pound was up 0.32% to $1.13921. A mixed start to the day saw the GBP/USD fall to an early low of $1.13458 before striking a high of $1.14000.

Technical Indicators

The Pound needs to move through the $1.1419 pivot to target the First Major Resistance Level (R1) at $1.1503 and the Wednesday high of $1.15669. Market risk sentiment would need to deliver support ahead of today’s all-important US CPI report.

In the case of an extended rally, the GBP/USD would likely test the Second Major Resistance Level (R2) at $1.1652. The Third Major Resistance Level (R3) sits at $1.1885. However, the Pound would need a soft US CPI report to fuel bets of a Fed pivot and deliver a GBP/USD boost.

Failure to move through the pivot would leave the First Major Support Level (S1) at $1.1270 in play. However, barring a US CPI report-fueled sell-off, the Pound would likely avoid sub-$1.12 and the Second Major Support Level (S2) at $1.1186.

The Third Major Support Level (S3) sits at $1.0952.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bearish signal. The GBP/USD sits at the 100-day EMA, currently at $1.13929. The 50-day EMA narrowed to the 100-day EMA, with the 100-day EMA closing in on the 200-day EMA, delivering bearish signals.

A move through the 50-day EMA ($1.14221) would support a breakout from R1 ($1.1503) to target R2 ($1.1652). However, a fall through the 100-day ($1.13929) and the 200-day ($1.13797) EMAs would bring S1 ($1.1270) into view.

The US Session

It is a busier day ahead on the US economic calendar. The all-important US CPI report for October will be the focal point today. Today’s CPI report will have a material impact on the Fed’s December policy decision. A pickup in inflationary pressure would see December pivot bets slide, which would be GBP/USD negative.

FOMC member chatter will also need monitoring. Members Harker, Logan, Mester, and George speak after the CPI report.

This morning, the probability of a December 75-basis point rate hike stood at 43.2%, up from 38.5% overnight and 42.2% one week ago. Expect today’s CPI report to influence sentiment toward the December move.

Away from the economic calendar, the US mid-term election results will also need tracking.