GBP/USD gained momentum and approached 1.2800 following the release of the UK’s inflation data.
The Consumer Price Index (CPI) stood at 8.7% YoY in May, surpassing the market forecast of 8.4%, driven by higher prices in air travel, recreational goods, and second-hand cars.
The core inflation rate for the UK showed a YoY increase of 7.1% in May, up from 6.8% in April, marking the highest rate since March 1992.
The inflation rate YoY remained steady at 8.7%, which is still extremely high and a concern for the Bank of England (BoE). The BoE meeting could be affected by the recent data, adding pressure on policymakers.
Food prices also remain an area of concern, with the YoY rate exceeding the inflation rate.
Fuel prices contributed to the downward trend, marking a drop of 13.1%, and the inflation rate for UK goods eased slightly to 9.7%, while inflation for the service sector accelerated to 7.4%.
Meanwhile, the continued repricing of the peak rate remains uncertain, and the core inflation print is a determining factor in the BoE’s decision.
GBP/USD saw an initial spike of 50 pips towards the 1.2800 area, with bulls still in control following the fresh yearly high printed last week.
The immediate support level is at 1.2680, with the 1.3000 level remaining the key level to watch for.
EUR/USD Remains Steady Before Fed’s Powell’s Testimony
The EUR/USD pair hovers in the low-1.0900 region as investors await guidance from the Federal Reserve’s Chairman, J. Powell. Prior market caution seems to influence the USD’s steady performance, which can be attributed to concerns regarding Powell’s upcoming hawkish remarks.
Although the lack of scheduled euro zone data might push investors to the USD, the ECB-Fed divergence, potential interest rate decision, and sticky UK inflation continue to hold interest in the forex market.
According to analysts, achieving the 1.1000 psychological barrier will require the EUR to surpass the June 16 high of 1.0970.
Resistance levels include the 2023 high, the round level of 1.1100, and the weekly high supported by the 200-week SMA at 1.1181. However, should the bears take charge, there are interim levels at 1.0880, 1.0635, 1.0516 and 1.0481.
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