The GBP/USD pair is little changed today as traders eye the ongoing Brexit negotiations and the important UK CPI data. It is trading at 1.3260, which is in the same range it was in overnight trading.
The ONS will release the official October UK CPI data at 07:00 GMT. With the UK economy struggling, analysts have modest expectations for inflation. Those polled by Reuters expect that the headline CPI data increased by an annualised rate of 0.6% in October from 0.5% in September. On a MoM basis, they expect the CPI to drop by 0.1%.
The analysts expect the UK core CPI rose by 0.1% in October leading to an annual increase of 1.3%. These numbers are clearly below the preferred rate of 2.0% by the Bank of England. Indeed, in its rate decision this month, the bank estimated that the rate will remain below 2.0% for the next two years.
The GBP/USD price will also react to the UK public net borrowing data. In the previous month, the debt rose by more than £35.37 billion, pushing the total debt to a 60-year high of more than £2.1 billion. That happened a few days after Moody’s downgraded the UK debt.
Meanwhile, traders are also watching out for the ongoing Brexit talks. Analysts expect that the two sides will reach a deal, possibly this week. Indeed, according to a UK newspaper, Boris Johnson has already been briefed about the potential of a deal.
Other important numbers set to move the GBP/USD will be UK car registration, retail price index, and UK PPI input and output.
GBP/USD technical outlook
In my report yesterday, I predicted that the GBP/USD would remain in a narrow range. I also estimated that the key level to watch would be 1.3250 with the resistance being at 1.3270.
That was indeed what happened as the GBPUSD managed to move above 1.3250 and is now a few pips below 1.3270.
On the hourly chart, the pair remains above the ascending trendline that is shown in red. This line connects the lowest levels since November 13. The uptrend is also supported by the 25-day exponential moving averages.
Therefore, for today, the likely scenario is where the pair manages to move above the 1.3270 resistance level as bulls target the high of 1.3313.
On the flip side, a move below 1.3250 will invalidate this thesis since it will mean that there are more sellers in the market.