GBP/USD Price Analysis – Nov 15, 2023

Daily Price Outlook

Despite the bearish US dollar, the GBP/USD pair failed to maintain its recent upward momentum, facing a slight decline after reaching a two-month high. However, this decline followed a slowdown in UK inflation in October, with the Consumer Price Index (CPI) showing a reduced growth rate of 4.6%. This suggests that UK Prime Minister Rishi Sunak may achieve his target of halving inflation by year-end. Furthermore, the UK Producer Price Index (PPI) dropped, signaling that manufacturers had to reduce prices due to weakened demand.

Despite the GBP/USD pair experienced a slight dip due to a softer inflation report, the overall demand of this pair remains strong, supported by an improved market risk appetite. This increased appetite for risk assets follows a decline in US consumer inflation and growing expectations that the Federal Reserve will refrain from further interest rate hikes.

Impact of UK Inflation Drop on GBP/USD Pair

Notably, the UK witnessed a significant slowdown in inflation, with the Consumer Price Index (CPI) growing by 4.6% annually, meeting PM Rishi Sunak's pledge to reduce inflation to 5.4% by year-end. Core CPI, excluding volatile items, softened to 5.7%. The Producer Price Index (PPI) also declined, indicating firms lowering prices due to weak demand.

Chief Economist Huw Pill suggested the Bank of England (BoE) might not need further rate hikes, with potential discussions on rate cuts given challenges in the labor market. The Unemployment Rate remains at 4.2%, and employers expect higher interest rates until at least mid-2024.

Thus, the decline in UK inflation and the successful commitment to halve it by year-end have influenced the GBP/USD pair. The prospect of no additional interest rate hikes by the Bank of England further undermine the GBP/USD pair.

Impact of Weakened US Dollar on GBP/USD Pair

Moreover, the US Dollar Index (DXY) is near a two-month low at 104.00, impacted by a drop in global oil prices, leading to softer US inflation in October. As a result, 10-year US Treasury yields are around 4.44%. Investors believe the Federal Reserve's rate-tightening efforts have likely ended. Despite the softer inflation, Richmond Fed Bank President Thomas Barkin notes the Fed is making progress but isn't convinced inflation is smoothly heading to 2%. Barkin suggests more action is needed to control demand and inflation. This situation contributes to the US Dollar's current state and overall market sentiment.

The news has led to a weakened US Dollar (DXY) near a two-month low, impacting the GBP/USD pair positively.

GBP/USD - Technical Analysis

In the currency corridors, the British Pound Sterling holds its ground against the US Dollar, with a marginal 0.02% downtick, bringing GBP/USD to 1.24953 as of November 15. Amid a turbulent economic landscape, this pair's steadfastness is noteworthy, hovering around a pivot point of $1.2401.

The currency faces immediate resistance at $1.2499, with subsequent barriers at $1.2562 and $1.2637 that could define the next leg of its journey. Support levels at $1.2300, $1.2199, and $1.2100 stand ready to underpin the Pound should it face bearish pressure.

The RSI, significantly perched at 79, waves a flag of caution for overbought conditions, suggesting a possible retracement or consolidation may be imminent. The MACD echoes a bullish sentiment, albeit subtly, with its line just above the signal line, hinting at sustained upward momentum. Meanwhile, the currency's position above the 50 EMA at $1.2292 reinforces the bullish undertone in the short term.

Chart patterns do not singularly dictate the course, yet the recent movements suggest a bullish inclination above the significant threshold of $1.2450. If the pair manages to sustain above this level, it could invite testing of higher resistances.

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