GBPUSD steadily traded lower in yesterday’s trading after opening at 1.3129. The CPI data out of the UK failed to inspire a rally on the currency pair. It closed lower at 1.3076 by the end of the New York session.
UK CPI Tops Forecasts
Yesterday, the CPI report for November showed a 1.5% uptick in consumer prices for the month of November. This was higher than the 1.4% forecast that markets were expecting. The core reading, which excludes volatile items, came in as expected at 1.7%. A better-than-expected inflation number is typically bullish for GBPUSD. This is because it would suggest that the BOE is unlikely to ease policy amid higher consumer prices.
No-Brexit Deal Weighs Down the Pound
However, it would seem that market participants are more concerned with the prospect of a no-deal Brexit which weighed down GBPUSD. The EU has responded after Prime Minister Boris Johnson moved to keep Parliament from voting for an extension beyond the December 2020 deadline and from overseeing negotiations. According to Guy Verhofstadt who is the EU’s chief Brexit coordinator, they could reject Johnson’s deal if issues on citizen’s rights are not addressed.
UK Retail Sales and BOE Rate Decision Due Today
Today’s retail sales report is due at 9:30 am GMT. It is expected that consumer spending picked up by 0.3% in November to follow the 0.1% contraction in October.
Then at 12:00 pm GMT, the Bank of England (BOE) will make its interest rate decision. No rate changes are expected. This means that interest rates will likely stay at 0.75%. However, market participants will be on their toes for hints about further easing in the coming months. There seems to be a consensus that the central bank would cut rates early next year as recent economic data from the UK have pointed at sluggishness in the economy.
Remember the rising trend line that I pointed out on GBPUSD yesterday? Well, it looks like support did not hold. The currency pair is currently trading below and under the 100 SMA around 1.3080. Any upward movement on GBPUSD today will be limited to 1.3232 where it previously found resistance. On top of that, this price also served as resistance last December 12. If there are enough buyers to push GBPUSD above this level, we could see the currency pair revisit its 19-month highs above 1.3500.
On the other hand, if sellers continue to dominate today’s trading, support at the 200 SMA must be overcome. If support at 1.2980 does not hold, the next one will be at 1.2760 where GBPUSD previously made lows on November 8.