US Dollar Forecast: GBP/USD Stumbles Below1.2600 Post-UK CPI Data

By:

Published: Feb 14, 2024, 07:57 GMT+00:00

GBP/USD navigates below 1.2600 as UK's steady inflation figures prompt reevaluation of monetary policy expectations, influencing market sentiment.

Highlights

US Dollar rallies post-CPI, hitting a three-month high; bullish trends influence Fed’s rate decisions.
GBP/USD dips under bearish pressure post-UK inflation data, trading below the 1.2600 level.
EUR/USD faces bearish sentiment, trading slightly below pivot point amid anticipation of key EUR data.

Dollar Soars on Strong CPI Data, Steering Fed’s Policy Outlook

The US Dollar exhibited a strong bullish trend, surging to around the 104.862 level, marking an increase of nearly 0.70%. This movement was significantly influenced by the latest US CPI as the Core CPI month-over-month increased to 0.4% against the forecasted 0.3%, and the overall CPI year-over-year rose to 3.1%, surpassing the anticipated 2.9%. This data underscores the persistent inflationary pressures within the US economy, potentially steering the Federal Reserve’s monetary policy decisions in the near term.

For the GBP, inflation remained steady at 4.0% year-over-year, aligning with previous figures but still indicating a tight grip on consumer prices. The Core CPI also reported a slight decrease to 5.1% from 5.2%, suggesting a nuanced shift in underlying inflation dynamics.

The Producer Price Index (PPI) data reflected a contraction, with input prices decreasing by 0.8% month-over-month, indicating a potential easing in production cost pressures.

Events Ahead

Looking ahead, significant events include speeches from FOMC Member Barr, who is expected to discuss economic policies and the Federal Reserve’s outlook. For the EUR zone, key data releases include the Flash Employment Change, GDP figures, and Industrial Production, which will provide insights into the economic health of the region.

GBP traders will closely monitor the Housing Price Index and BOE Governor Bailey’s testimony for cues on future monetary policy directions.

US Dollar Index (DXY)

Dollar Index

On February 14, the Dollar Index is hovering just above its pivot point at 104.847. This position indicates a bullish sentiment, as the index trades above key resistance levels at 105.178, 105.393, and 105.632. These levels serve as markers for potential upward movement.

Conversely, immediate support lies at 104.430, with further support at 104.091 and 103.821, providing a safety net against declines.

The 50-day and 200-day Exponential Moving Averages (EMAs), at 104.351 and 103.836 respectively, underscore the index’s bullish trend, reinforcing its current momentum above the pivot point.

Given these indicators, the Dollar Index’s trajectory suggests a continued bullish outlook, contingent on maintaining levels above 104.847, with traders eyeing resistance breaches for confirmation of sustained strength.

EUR/USD Technical Forecast

EUR/USD Price Chart – Source: Tradingview

The EUR/USD pair experienced a slight decrease, trading at 1.07062, marking a 0.02% drop. This movement positions the currency pair just below the pivot point of 1.07186, indicating a bearish sentiment in the near term.

Resistance levels are identified at 1.07366, 1.07618, and 1.07939, which need to be surpassed for a bullish reversal. Conversely, support levels at 1.06932, 1.06750, and 1.06558 provide potential floors to mitigate further declines.

The 50-day Exponential Moving Average (EMA) at 1.07700 and the 200-day EMA at 1.08386 suggest that the pair is currently trading below key moving averages, reinforcing the bearish outlook.

Given this technical landscape, the EUR/USD’s direction appears bearish below the pivotal mark of 1.07186, with traders closely monitoring these levels for potential entry or exit points.

GBP/USD Technical Forecast

GBP/USD Price Chart – Source: Tradingview

The GBP/USD pair recorded a decline, trading at 1.25613, a 0.24% decrease. Positioned below its pivot point of 1.26044, the pair displays a bearish outlook for the near term. Key resistance levels are set at 1.26436, 1.26830, and 1.27185, challenging any potential upward momentum.

Conversely, support levels at 1.25476, 1.25171, and 1.24910 provide a cushion against further declines. The 50-day and 200-day Exponential Moving Averages (EMAs), at 1.26232 and 1.26503 respectively, suggest the pair is trading beneath critical moving averages, reinforcing a bearish sentiment.

Given these technical indicators, GBP/USD’s trajectory seems inclined towards bearishness below the crucial 1.26044 mark, with investors and traders monitoring these levels closely for potential market movements.

For a look at all of today’s economic events, check out our economic calendar.

About the Author

Arslan Aliauthor

Arslan is a finance MBA and also holds an MPhil degree in behavioral finance. An expert in financial analysis and investor psychology, Arslan uses his academic background to bring valuable insights about market sentiment and whether instruments are likely to be overbought or oversold.