GBP/USD Forms a Double-Top Ahead of UK Jobs and CPI Data
GBP/USD extended last week’s losses on Monday ahead of the UK inflation data. In the ensuing sessions, the Fed meeting minutes is also set to impact the currency pair. In the event-filled week, the range between 1.2050 and 1.2119 will be worth watching in the short term.
UK jobs and inflation data
In mid-July, the Sterling Pound dropped to its lowest level since March 2020 at $1.1760. Granted, it has since rebounded above the psychologically critical zone of 1.2000; holding steady above this level for the third week in a row.
Even so, GBP/USD remains under pressure with the major headwinds of the UK economy being the high cost of living and persistent energy crisis. Wholesale natural gas prices in the country have increased by more than four times the current season’s average over the past 5 years. According to the Bank of England (BoE), inflation will likely top 13% in coming months with a recession likely in 2023.
The UK inflation data scheduled for release on Wednesday is expected to give further cues on the state of the country’s economy and the Sterling Pound by extension. Notably, consumer prices have been on a steady rise since July 2021. Economists expect the CPI to have risen by 9.8% in July compared to a similar period in the past year. This is a higher pace compared to the prior month’s 9.4%.
Later in the week, the market will be reacting to the UK retail sales, which are expected to have dropped by 0.2% in July compared to the recorded decline of 0.1% in June. Besides, the country’s jobs data are scheduled for release on Tuesday. The unemployment rate is forecast to remain at 3.8% for the third month in a row.
At the same time, the market is keen on the Fed meeting minutes set for release on Wednesday. In its July meeting, the US central bank approved an interest rate hike of 75 basis points for the second month in a row; the fastest pace since the 1980s.
Since then, bets on its next move during the September meeting have been swinging between a rate hike of 50 and 75 basis points. This comes as the US labor market remains strong and inflation data drops below economists’ forecasts.
GBP/USD forecast
The GBP/USD price continued its bearish trend ahead of the upcoming UK jobs and inflation data. It dropped to a low of 1.2056, which was the lowest level since August 8. On the four-hour chart, the pair moved below the 25-day and 50-day moving averages. It also formed a double-top pattern. Therefore, the sellers continued falling as sellers target the next key support at 1.2000.
