British Pound (GBP), Price Outlook: GBP/USD Advancing after UK Inflation Data

GBP PRICE, NEWS & ANALYSIS:

British Pound (GBP), Price Outlook: GBP/USD Advancing after UK Inflation Data
  • GBP/USD is on the rise after August's UK inflation data showed the largest jump in recorded history.
  • Inflation figures, combined with Tuesday's strong UK employment numbers will increase the pressures on Bank of England to reduce its stimulus program. This will also add to the upward pressure on GBP.

GBP/USD RALLYING AFFECTIVE TO STRONG UK INFLAATION DATA

GBP/ US is moving higher after August's UK inflation numbers showed an increase in the headline rate to 3.2%. This is above the previous 2.0% as well as the 2.9% consensus forecast by analysts polled at the news agencies. Core inflation rose by more than anticipated.

With the UK unemployment and inflation rising faster than expected, more members of Bank of England's Monetary Policy Committee are likely to become hawkish. This could bring closer the day when Bank of England will tighten UK monetary policies.

GBP/USD has now recovered about half of the losses recorded Tuesday in US trading hours. However, it faces resistance at 1.3850, which is around a trendline that was once support, but could act as resistance.

Next week's UK retail sales data will be released on Friday. It is expected to show a 2.7% increase in year-over-year growth in August. However, the inflation and employment numbers suggest that there is a possibility of the numbers exceeding expectations, despite continued fears about global growth, reinforced by recent data from China, which showed retail sales and industrial production below the forecasts for the year.

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