GBP/USD Moves Lower After UK Inflation Reports Exceed Expectations

Key Insights

• UK inflation reports show that Inflation Rate increased by 7% year-over-year in March.
• Inflation data did not provide support to the British pound as Treasury yields have started to rebound after yesterday’s pullback. 
• A move below the support level at 1.3000 will push GBP/USD towards the support at 1.2970.

British Pound Remains Under Pressure Against U.S. Dollar

GBP/USD is testing the support level at 1.3000, while the U.S. dollar is gaining ground against a broad basket of currencies.

The U.S. Dollar Index managed to settle above the resistance at 100.30 and is moving towards the next resistance level at 100.50. In case the U.S. Dollar Index gets above 100.50, it will head towards the resistance at 100.85, which will be bearish for GBP/USD.

Today, foreign exchange market traders will focus on the inflation reports from the UK. Inflation Rate increased by 1.1% month-over-month in March, compared to analyst consensus which called for growth of 0.7%. On a year-over-year basis, Inflation Rate grew by 7%, compared to analyst consensus of 6.7%. Core Inflation Rate increased by 5.7% year-over-year.

Meanwhile, Treasury yields have started to move higher after yesterday’s pullback, and the yield of 10-year Treasuries has already managed to get back above the 2.75% level. In case Treasury yields get back to recent highs, the American currency will get more support.

Technical Analysis

GBP/USD remains stuck near the important support level at 1.3000. This support level has already been tested several times in recent trading sessions and proved its strength.

In case GBP/USD manages to settle below the support at 1.3000, it will gain additional downside momentum and head towards the next support at 1.2970. A move below this support level will open the way to the test of the support at 1.2940. If GBP/USD gets below 1.2940, it will head towards the support at 1.2915.

On the upside, a move above 1.3000 will push GBP/USD towards the resistance at 1.3030. In case  GBP/USD settles back above this level, it will head towards the next resistance level at 1.3050. A successful test of the resistance at 1.3050 will open the way to the test of the next resistance level, which is located at 1.3080.

For a look at all of today’s economic events, check out our economic calendar.