GBP/USD – Fundamental Update

On Tuesday, GBP slipped to a near two-month low against USD, trading below 1.5900 mark for the first time since Sept. 13, after UK inflation for October dropped more than expected. According to estimates released by the UK Office for National Statistics on Tuesday, UK inflation in October, measured by Consumer Price Index (CPI), slowed to 2.2%, down from September’s reading of 2.7%. The reading came-in below consensus expectations of a 2.5% rate and near BoE’s target of 2%, curbing expectations of an interest-rate hike by the Bank of England in the near-future.

Leading to the BoE’s inflation report, UK labor data report released on Wednesday by the Office for National Statistics showed unemployment rate falling to over four-year low between July to September 2013. The unemployment rate fell in line with analysts’ forecasts to 7.6% from 7.7% recorded during the preceding three months to August.

Also on Wednesday, the BoE’s November inflation report, that reveals central bank’s inflation projection and economic growth over the next 2 years, released on Wednesday, projected that the unemployment rate could fall to 7% earlier than 2016, which was previously forecasted, and that CPI inflation was set to fall back to around the 2% target over the next year or so. In the light of the economic outlook the central bank left interest rates at a record low of 0.5% and maintained its asset purchase facility at 375 billion Pounds. The BoE, in its August inflation report, has already said that it will wait until the unemployment rate declines below 7% threshold before considering to raise its benchmark interest rate from the record low level of 0.5%. This condition was, however, subject to forecasts for annual consumer price inflation remains around the 2% target in the next 18 to 24 months.

Following a better employment report, combined with BoE’s upbeat economic outlook, raised expectations of a rate hike as soon as 2015 or earlier than that, boosting GBPUSD back towards 1.6000 level.

From technical perspective, GBPUSD currency pair rebounded from an intermediate support near 1.5850 area to its immediate resistance near 1.6020 area. Should the pair manage to clear this immediate hurdle, it seems to be heading towards testing a major hurdle near 1.6120 – 1.6140 zone. Read more: Technical Outlook – EURUSD, AUDUSD, GBPUSD

However, a better-than-expected US third-quarter GDP and strong October US non-farm payrolls has resurfaced the discussion of the Fed tapering its massive monetary stimulus of $85 billion monthly asset purchases sooner rather than later, which could possibly cap any big up-moves for GBPUSD.

• Original Article: Admiral Markets and hyper link Admiral Markets with http://www.admiralmarkets.com/