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UK Inflation Reaches 40 -Year High, GBP/USD Slides – By ASC


UK Inflation and GBP/USD – Prices, Charts and Analysis

  • Headline inflation hit 9%, core rose to 6.2%.
  • Sterling fell lower after Tuesday’s rally.

Prices in the UK rose 9% in April year -on -year, a new 40 -year high and another worrying print for the Bank of England (BoE). While that number will trigger many tabloid headlines, financial markets expect a slightly higher reading of 9.1% today, leaving Sterling relatively unchanged on a post -release decline.

For all data and economic events driving the market, refer to DailyFX calendar

The next UK data release note is the Friday Retail Sales report for April. Always a volatile release, the report is expected to show consumers keeping their hands in their pockets firmly with sales seen to contract. High inflation and consumers reluctant to spend are twice as difficult for the BoE to deal with.

British Pound Latest: UK Inflation Reaches 40 -Year High, GBP/USD Slides

GBP/USD jumped more than 1.3% on Tuesday, its best performance in almost 18 months after the UK Jobs Report showed that the labor market remained in an unhealthy state. The unemployment rate fell to 3.7%, the lowest level in 50 years, while average income including bonuses rose by 7% in March as employers paid more to retain existing staff.

The rally in cable was also helped by the slightly weaker US dollar as traders reduced their bets recently on the US dollar. The US dollar (DXY) basket has been hit by hawkish Euro comments from ECB councilor Klaas Knot that raised the possibility of a 50 basis point rate hike this year, the first time any councilor has mentioned this number. The euro rose, pushing the US dollar basket lower. The cable hit and then reversed around 1.2500 on Tuesday, the 61.8%Fibonacci retracement level, and the pair is now looking to see if they can break back below 1.2400. Below here support is seen at 1.2382 and 1.2274.

GBPUSD Daily Price Chart May 18, 2022

British Pound Latest: UK Inflation Reaches 40 -Year High, GBP/USD Slides

Retailer data shows 69.52% of traders are net long with the ratio of long to short traders at 2.28 versus 1. The number of net-long traders was 12.59% lower than yesterday and 19.96% lower than last week, while the number of net-short traders was 40.21% higher than yesterday and 50.83% higher than last week.

We typically take a view that is contrary to public sentiment, and the fact that traders are net length suggests the GBP/USD price may continue to fall. Yet traders are less net length than yesterday and compared to last week. Recent changes in sentiment warn that the current The GBP/USD price trend may soon turn higher despite the fact that traders remain clean.

What is your view Sterling – up or down ?? You can let us know via the form at the end of this section or you can contact the author via Twitter @nickcawley1.

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