The British Pound (GBP) is currently trading slightly above break-even against the US Dollar (USD) at 1.2739, despite retreating from a two-month high earlier in the day. This follows the release of a hotter-than-expected UK inflation report.
Market Reaction to UK CPI Data:
- Hotter Inflation: The higher-than-anticipated inflation reading initially boosted the Pound, reflecting expectations of a more hawkish Bank of England (BoE) stance.
- Pullback from Highs: However, the GBP/USD retreated as the inflation figures neared the BoE’s target, potentially suggesting less aggressive action from the central bank.
Technical Analysis (GBP/USD):
- Neutral to Upward Bias: Despite the pullback, the GBP/USD remains technically neutral with a slight upward bias. The Relative Strength Index (RSI) indicates ongoing bullish momentum.
- Support and Resistance: Immediate support lies at the psychological level of 1.2700. A breach below this level could expose the pair to 1.2634, a confluence of technical indicators. On the upside, reclaiming 1.2803 (March 21st high) would signal further bullish potential towards the YTD high and potentially 1.3000.
The GBP/USD’s near-term direction hinges on market perception of the BoE’s response to the inflation data. A more hawkish stance from the central bank could strengthen the Pound, while a dovish approach might lead to a decline.