Market Analysis

Pound Sterling jumps following hotter-than-expected UK inflation statistics

Amos Simanungkalit · 17 Apr 20249.6K Views

The Pound Sterling (GBP) staged a robust recovery during Wednesday's London session following the release of data by the United Kingdom Office for National Statistics (ONS) indicating stronger-than-expected growth in the Consumer Price Index (CPI) for March.

Despite surpassing economists' expectations, inflation moderated compared to February, suggesting that the Bank of England's (BoE) decision to raise interest rates has helped alleviate price pressures.

Additionally, producer price inflation has decelerated, signaling a decrease in prices of goods and services at the factory level. This often occurs when businesses anticipate subdued demand and adjust prices accordingly.

While slightly elevated inflation figures may cast doubt on expectations for a rate cut by the BoE in November, recent employment data released on Tuesday indicated a cooling in the UK job market.

The labor market report revealed a sharp increase in the Unemployment Rate to 4.2% for the three months ending in February, exceeding expectations of 4.0% and surpassing the previous release of 3.9%. Furthermore, the number of employed individuals decreased by 156,000 in the three months to February, surpassing the 89,000 jobs lost in the previous quarter ending January.

Technical Analysis: Pound Sterling Finds Cushion Near 1.2400

Following the release of the UK inflation statistics for March, the pound sterling has regained strength. The GBP/USD pair is seeing significant buying at the critical support level of 1.2400. The Cable's upside potential is considered as limited near the psychological barrier level of 1.2500. This corresponds to the breakdown zone of the Head and Shoulder chart formation on a daily basis.

The Cable's long-term outlook becomes bearish when it falls below the 200-day Exponential Moving Average (EMA), which is now trading around 1.2560.

The 14-period Relative Strength Index (RSI) has shifted into the bearish zone of 20.00-40.00, indicating an active downward momentum.