GBP/USD: Mildly offered below 1.3200 amid anxiety over Ukraine-Russia talks ahead of US inflation
- GBP/USD picks up bids to consolidate early Asian session losses.
- Ukraine-Russia headlines join US inflation fears to underpin USD buyers.
- Fears of steady recruitment, rising inflationary pressure keep GBP bears hopeful.
- US CPI may renew Fed v/s BOE drama as markets expect heavy price pressure.
GBP/USD pares daily losses, down 0.11% on a day around 1.3170 heading into Thursday’s London open.
The cable pair recovered from a 16-month low on Wednesday as broad risk-on mood weighed on the US dollar. However, cautious sentiment ahead of today’s key data/events tests the pair buyers of late.
Additionally, headlines from the Independent suggesting another attempt by the UK government to highlight Brexit as a positive change also seemed to have underpinned the GBP/USD upside the previous day. “The government is to launch a study of the economic benefits of reintroducing imperial units of measurement, to quantify a supposed advantage of Brexit,” said the news.
Market’s mood improved the previous day as Ukraine’s retreat from NATO joined readiness to compromise on certain goals, if Russia does the same. However, Moscow’s rejection to concede anything joins the West versus Moscow tussles, via Kyiv, to weigh on the sentiment of late.
The market’s anxiety and upbeat prints of US inflation expectations together offer a firm footing to the US Dollar Index (DXY) by the press time. The inflation gauge, as per the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, refreshed record top to 2.9% before stepping back to 2.84% by the end of Wednesday’s North American trading session.
Looking forward, GBP/USD traders are likely to witness further downside pressure as odds are high for negative news from Ankara, concerning Russia-Ukraine talks. Also likely to favor the pair sellers is the US Consumer Price Index, expected to rise to 7.9% versus 7.5% prior. It should be observed that the Bank of England (BOE) also pleases hawks of late but a firmer US inflation will help the Fed support 0.50% rate-hike expectations, which in turn will widen the BOE v/s Fed gap and could propel the greenback.
Read: US February CPI Preview: Will hot inflation force Fed’s hand?
Technical analysis
Bullish MACD and the quote’s sustained rebound from the lowest levels since November 2020 hint at a further corrective pullback of the GBP/USD pair.
A convergence of the six-week-old previous support line and a downward sloping trend line from February 23 offers a tough nut to crack for the GBP/USD bulls around 1.3230.
Meanwhile, the 1.3100 round figure may act as immediate support during the further declines, ahead of the latest low near 1.3080.