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Sterling plummets as weak UK inflation print scares off buyers

FXstreet.com (Barcelona) - The Sterling plummeted during the previous European session, trading as low as 1.5112 before finding support but still finishing the day down 106 pips at 1.5150.

The main catalyst for the weakness was due to the most recent inflation data release out of the UK. According to Mike Jones, Currency Strategist at BNZ, “GBP/USD held around its 1.5140 overnight lows following some surprisingly weak UK inflation data (2.4%y/y vs. 2.6% expected). We still expect inflation to remain above the BoE’s target until 2015, limiting the Bank’s headroom to ease policy. We suspect the BoE will only resort to more QE should the UK economy start to contract again.”

The FXStreet.com Trend Index remains in slightly bearish set up on the daily chart, while the OB/OS Index remains Oversold. According to analysts at FXStreet.com, “As suggested in recent commentaries about the Pound, the downside continues to be the path of least resistance, as no major demand is identified until below 1.50. On the upside, fresh supply on the H4 chart has been produced after lower-than-expected CPIs in the UK.” Initial resistance sits at 1.5198 (the 50dma on 1 hour chart), followed by 1.5280 (supply candles on 1 hour chart). First support sits at 1.5112 (previous day low).

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