GBP/USD tumbles to fresh lows near 1.2980 post-CPI
- GBP/USD eases further ground on Wednesday.
- UK CPI rose 1.3% YoY in December, below estimates.
- BoE’s Saunders favours the current accommodative stance.
The sterling is losing its shine further on Wednesday and is now motivating GBP/USD to recede to the vicinity of 1.2980, or daily lows.
GBP/USD weaker on data, BoE
Cable is fading Tuesday’s gains after UK inflation figures tracked by the CPI disappointed expectations in December, rising at an annualized 1.3% (from 1.5%) and coming in flat on a monthly basis. In addition, consumer prices excluding food and energy costs (Core CPI) also came in short of estimates at 0.0% inter-month and 1.4% from a year earlier.
Adding to the downside in the pound, BoE’s M.Saunders said earlier today that an interest rate cut could be appropriate amidst the current economic conditions and the slowdown in the labour market. It is worth recalling that Saunders voted for a rate cut in the last two BoE meetings.
More from the UK docket is coming on Friday with the release of Retail Sales figures for the month of December. Later on Wednesday, the signing of the US-China’s ‘Phase One’ deal is expected to dominate the headlines in the global markets.
What to look for around GBP
The quid is suffering the poor domestic data and increasing speculations of a reduction in the policy rate by the Bank of England at some point in the short-term horizon. In addition, the currency is expected to remain under pressure in the next months, as economic and political uncertainty are predicted to re-emerge after the Brexit deadline on January 31st. Furthermore, extra effervescence between the EU and the UK is almost priced in, particularly when comes to negotiations on the trade front.
GBP/USD levels to consider
As of writing, the pair is retreating 0.13% at 1.2999 and a breakdown of 1.2954 (2020 low Jan.14) would expose 1.2904 (low Dec.24 2019) and finally 1.2757 (100-day SMA). On the upside, initial hurdle emerges at 1.3075 (21-day SMA) seconded by 1.3212 (high Jan.7) and then 1.3284 (high Dec.31 2019).