GBP to USD Forecasts: Bulls Eye Return to $1.3150 on Sticky Inflation

Highlights

• The GBP to USD had a bearish start to the Wednesday session, with support at $1.30 in view.
• It is a big day on the UK economic calendar. The UK CPI Report will be in focus this morning.
• Sticky UK inflation numbers would support the more hawkish bets of the BoE pushing interest rates beyond 6% after the summer.

It is a big day ahead for the GBP to USD. UK inflation is in the spotlight, with the UK CPI Report likely to garner plenty of interest early in the European session.

After the hotter-than-expected UK wage growth and better-than-expected GDP numbers, today’s CPI Report could support the more hawkish bets on peak interest rates and raise the threat of a prolonged UK economic recession.

Economists forecast the UK annual inflation rate to soften from 8.7% to 8.2%, which could force the BoE to push ahead at the expense of the UK economy.

Investors should monitor Bank of England chatter with UK inflation in the spotlight. Monetary Policy Committee member Dave Ramsden is on the calendar to speak today. However, investors should also monitor comments to the media to influence.

The US Session

It is a relatively busy day on the US economic calendar, with the US housing sector in the spotlight. Prelim building permits and housing start numbers for June will draw interest.

A continued uptrend in permits and starts would signal optimism among home builders and strong home buyer demand. Upbeat numbers would support the theory of a soft landing despite the disappointing US retail sales and industrial production numbers. The housing sector is a litmus test of the US economy.

GBP to USD Price Action

Daily Chart

The Daily Chart showed the GBP to USD sat below the $1.3195 – $1.3255 resistance band. Looking at the EMAs, the GBP to USD remained above the 50-day ($1.27040) and 200-day ($1.23965) EMAs, signaling bullish momentum over the near and long term.

Notably, the 50-day EMA continued to pull away from the 200-day EMA and reflected a bullish trend.

Looking at the 14-Daily RSI, the 66.71 reading sent bullish price signals, which aligned with the 50-day and 200-day EMAs. A GBP to USD move through the lower level of the $1.3195 – $1.3255 resistance band would support a run at $1.3250. The GBP to USD would need to avoid a fall to sub-$1.30 to target the resistance band.

4-Hourly Chart

Looking at the 4-Hourly Chart, the GBP to USD sits at the $1.30 psychological support level. After the bearish Tuesday session, the GBP to USD continues to sit below the $1.3195 – $1.3255 resistance band.

However, the GBP to USD remains above the 50-day ($1.29825) and 200-day ($1.27663) EMAs, sending bullish signals. Significantly, the 50-day EMA pulled further away from the 200-day EMA, signaling a return to $1.31 to bring the $1.3195 – $1.3255 resistance band into play.

However, the GBP to USD must avoid sub-$1.30 to support a sustained run at the $1.3195 – $1.3255 resistance band.

The 14-4H RSI reading of 44.93 sent bearish signals, with selling pressure outweighing buying pressure. Significantly, the RSI signals a fall through the 50-day EMA ($1.29825) to bring the $1.2862 – $1.2785 support band into view.