The GBPUSD pair is in its fifth straight day of gains today as investors react to the strong inflation data and the ongoing sixth round of Brexit talks. The pair is trading at 1.3265, which is the highest it has been since December 2019. It has gained by about 15% from its lowest level in March.
UK inflation rises
The main catalyst for the GBPUSD pair today is the inflation data released by the Office of National Statistics. The data showed that the headline consumer inflation rose by 1.0% in July, higher than the 0.6% that analysts were expecting. That was the first time since March that the CPI was above 1%. On a month-on-month basis, the headline CPI rose by 0.4%, which was higher than the decline of 0.4% that analysts were expecting.
Meanwhile, the core CPI, which excludes the volatile food and energy products rose by 1.8%, its highest level in three months. It was higher than June’s 1.4% and the consensus estimates of 1.3%. The CPI rose by 0.4% on a month-on-month basis.
The Retail Price Index rose by 1.6% while the core RPI rose by 1.9%. On a MoM basis, the RPI and core RPI rose by 0.5%.
The inflation numbers are the latest upbeat data from the UK. Recent data, including retail sales, employment, and PMIs have been relatively strong.
Another catalyst moving the GBPUSD is the ongoing Brexit negotiations. While expectations for a deal are relatively low, analysts believe that the two sides will make some concessions.
The GBPUSD pair has been in a strong upward trend as shown in the daily chart below. The price is trading at the highest level since December last year. Also, it has moved above the bullish pennant pattern that is shown in black. Most importantly, the GBPUSD pair is above the short and medium-term moving averages.
Therefore, it seems – at least in the near term – that bulls are in total control, which means that the uptrend is likely to continue. If it does, the next resistance level to watch will be 1.3515, which is the highest it has been since December 13.
On the flip side, a move below 1.3000 will invalidate this trend. This is an important psychological level that is also at the lower side of the pennant pattern.