It was trading at 1.3428 on Thursday, following a period of volatility following the release of UK inflation data, which came in weaker than expected despite geopolitical tensions over Iran and rising oil prices.
The UK consumer price index (CPI) slowed to 2.8% in April, down from 3.3% in March, while the market had anticipated a reading of 3%.
The market interpreted these figures as a sign that the Bank of England may not need to aggressively raise interest rates in the short term. This has reduced expectations of further tightening and weighed on the pound.
Weak labor market data in the UK added to the negative sentiment. Recent statistics indicated a slowdown in hiring and a decline in new vacancies, reflecting the impact of the broader economic environment.
It is important to note that the effect of slower inflation may be temporary. Since the start of the conflict with Iran, global oil prices have increased by approximately 50%, and this increase is likely to affect the UK economy and consumer prices over time.
Technical analysis
On the H4 GBP/USD chart, the pair is trading within a wide consolidation range above 1.3388, which currently extends to 1.3490. A move lower towards 1.3380 is likely. After this, the pair may consolidate, with potential to move to 1.3515 on the upside or decline towards 1.3200 on the downside. The MACD indicator supports this scenario, with the signal line below zero and pointing firmly downwards.
On the H1 chart, GBP/USD is trading within a compact consolidation range around 1.3434, which currently extends to 1.3464. A downward move towards 1.3333 is possible. The stochastic oscillator confirms this scenario, with its signal line below 50 and pointing firmly towards 20.
Conclusion
GBP/USD stabilized following weaker-than-expected UK inflation data, easing concerns about the Bank of England's aggressive rate hikes. However, the pound faces headwinds due to a weak labor market and rising oil prices, suggesting any recovery may be short-lived. Technical indicators point to a short-term correction before a possible continuation of the broader trend.
By RoboForex Analysis Department
Disclaimer: Any forecast contained herein is based on the author's personal opinion. This analysis cannot be considered trading advice. RoboForex assumes no responsibility for trading results based on the trading recommendations and reviews contained herein.
