GBPUSD bulls pierce 1.1400 while bracing for US inflation, UK Q3 GDP

  • November 10, 2022
  • GBPUSD takes the bids to refresh intraday high, extends bounce off 50-DMA.
  • High hopes form UK PM Sunak underpin recovery despite pessimism surrounding British property markets and hirings.
  • Mixed Fedspeak, downbeat US inflation expectations favor buyers amid sluggish session.
  • US CPI for October could entertain traders ahead of British GDP data, limited upside expected.

GBPUSD renews its intraday high around 1.1410 amid a broad US dollar weakness early Thursday as traders prepare for the all-important US Consumer Price Index (CPI) for October. In doing so, the Cable pair rebounds from the 50-DMA while re-approaching a two-month-old descending resistance line.

The quote’s latest run-up could be linked to the downbeat US Treasury yields following the comments from Minneapolis Federal Reserve (Fed) President Neel Kashkari. Also likely to have favored the pair buyers are the hopes of the UK’s new government led by Prime Minister (PM) Rishi Sunak.

That said, the US 10-year Treasury yields print a three-day downtrend around 4.077% by the press time, which in turn pulled back the US Dollar Index (DXY) to reverse the previous day’s bounce off 100-DMA.

Fed’s Kashkari mentioned, “Some things are out of our control on inflation.” Previously, New York Federal Reserve (Fed) President John Williams mentioned that the relatively stable long-term inflation expectations are good news. On the same line, Richmond Fed President Thomas Barkin also mentioned that the Fed’s fight against inflation may lead to a downturn in the US economy but that is a risk that the Fed will have to take.

At home, UK PM Sunak will be the first British leader in 15 years to attend the British-Irish Council summit. The Tory leader will also meet his Scottish and Welsh counterparts to rebuild relations on Thursday. Additionally, the UK government is up for cutting the surcharge on bank profits to 3% to keep the industry competitive, per Bloomberg.

Alternatively, a survey from the UK’s Recruitment and Employment Confederation (REC) said, “With the Bank of England now warning of the risk of the longest recession in at least a century, permanent placements fell for the first time since February 2021.” On the same line are the fears surrounding the British property market amid the first fall in the UK housing prices in 28 months during October.

Amid these plays, the US stock futures are mildly bid but the Asia-Pacific equities are sluggish amid anxiety ahead of US CPI. Forecasts suggest that the headline CPI will ease to 8.0% YoY from 8.2% prior while the more important Core CPI may remain mostly unchanged near 6.5%, compared to 6.6% previous readings. Given the hopes of softer inflation, the GBPUSD prices may witness further upside amid downbeat inflation data. However, the fears of a recession in the UK may keep the upside limited ahead of Friday’s British Gross Domestic Product (GDP) for the third quarter (Q3), expected -0.5% QoQ versus 0.2% prior.

Technical analysis

Unless providing a daily closing beyond the two-month-old resistance line, close to 1.1600 by the press time, the GBPUSD bears are likely to retest the 50-DMA support near 1.1320.