GBP/USD Price Analysis – Sep 15, 2023

Daily Price Outlook

The GBP/USD pair is holding steady in a tight range near 1.2490. It's struggling to break above the 1.2500 mark due to upcoming US economic data. However, the pair's recent decline can be attributed to a mix of factors, including downbeat UK data and a strong US dollar.

Challenges in UK Economy and BoE's Caution

The UK's unemployment rate rose to 4.3% from 4.2%, with 207,000 job losses in July, causing concerns about a recession. Despite this, the Bank of England worries about high wages fueling inflation, as earnings grew by 8.5%. The GDP unexpectedly shrank by 0.5% in July. A BoE policymaker, Catherine Mann, believes it's too early to stop raising interest rates, but this stance is worrying investors and putting pressure on the British Pound (GBP), affecting its exchange rate with the US Dollar (USD).

US Inflation Surges in August, Impact on Fed's Decision

Apart from this, the US Bureau of Labor Statistics reported in August the highest monthly inflation increase in 14 months. The Consumer Price Index (CPI) rose by 0.6% from the previous month, exceeding expectations, and showed an annual increase of 3.7%. The core CPI, excluding food and energy prices, also increased by 0.3% month-on-month, with an annual rise of 4.3%.

While many expect the Federal Reserve (Fed) to keep interest rates unchanged at the upcoming FOMC meeting, these numbers indicate that the Fed should stay alert to the possibility of inflation picking up in the coming months. Currently, there's a 97% probability of no rate change in September, but there's a 49.2% chance of a rate hike in November, according to the CME Fedwatch Tool.

Thus, the rising US inflation and the potential for future interest rate hikes has put upward pressure on the US Dollar (USD) against the British Pound (GBP). This has led to a decline in the GBP/USD currency pair as investors seek the strength of the USD.

Market Outlook for GBP/USD Amid Upcoming US Data

Looking forward, with no UK economic data on Wednesday, the GBP/USD pair will be influenced by USD movements. Traders await US data like weekly Initial Jobless Claims, the Producer Price Index (PPI), and monthly Retail Sales. On Friday, the preliminary Michigan Consumer Sentiment Index for September will be key. These releases may guide GBP/USD trading.

GBP/USD - Technical Analysis

The GBP/USD pair experienced a pronounced downtrend yesterday, successfully reaching our anticipated target of 1.2400 and currently hovering around this mark. We anticipate further potential decline, with the next significant target positioned at 1.2310.

This bearish outlook remains dominant, reinforced by the EMA50 which exerts downward pressure on the price. It's imperative to note that for the bearish momentum to persist, the price should remain below 1.2505. Today's projected trading range lies between a support level of 1.2320 and a resistance level of 1.2480.