GBP–USD Faces Test at $1.2190 Amid Increasing Bets of Softer U.S. Inflation

It’s a quiet Wednesday for the GBP-USD, without United Kingdom economic signals to contemplate. The lack of data will leave GBP-USD under the influence of the market’s risk sentiment. The pair showcased movements today morning. Market anticipations of softer United States inflation figures supported partial revivals of the latest loss.

Nonetheless, while softer inflation numbers from the United States will reduce the Fed’s aggressive trajectory, the United Kingdom’s economic picture remained bleak. Continued consumer spending, backed by price caps on energy, might force the BoE (Bank of England) to keep increasing rates as it battles to cool inflation to estimated targets.

Meanwhile, Catherine Mann of MPC commented on these price caps during the weekend. Bloomberg reported that Mann stated that energy cost caps would trigger a spending shift to different goods while eradicating the caps would lead to inflation uncertainty. However, she added that price caps would reduce inflation rates mechanically, which is relevant to her financial policy decision.

The BoE warned that the United Kingdom endured a record-long recession in November. While ISM PMI figures from the United States confirmed private sector contraction in December, market players trust a soft landing, indicating intensified resistance for the GBP-USD around its current levels.

The World Bank reviewed its economic growth predictions today morning, indicating dangers to the GBP-USD. Nonetheless, the media chatter will attract interest as no other MPC staff will speak later on the day.

GBP-USD Price Action

The Pound hovered at $1.21609 during this writing, reflecting a 0.09% uptick. Early range-bound movements saw the pair dipping to the $1.21407 low before surging to $1.21641. Technical indicators show the Pound should avoid $1.2153 to head toward the initial massive resistance of $1.2196. That would welcome uptrends toward Tuesday’s peaks of $1.21979.

Reclaiming $1.2190 would authorize a bullish session during the afternoon. Nonetheless, risk-on sentiment remains crucial for Pound’s breakout session. In the case of an extended rally, GPB-USD could test the second crucial resistance of $1.2241. Afterward, the pair would meet the 3rd massive resistance near the $1.2329 value area.

Declines below $1.2153 would trigger slumps toward the first massive support floor at $1.2108. Nevertheless, barring risk-off-catalyzed dips, GBP-USD should escape the $1.2100 vicinity and the 2nd support barrier near $1.2065. Meanwhile, the 3rd reliable foothold locates at $1.1976.

Exponential Moving Averages

The Exponential Moving Averages and the four-hourly chart presented bullish signals. GBP-USD hovered beyond the 50day Exponential Moving Average ($1.20809). the 50d EMA crossed the 100day EMA, as the 100day EMA drifted from the 200day EMA – demonstrating bullish signs.

Sustaining beyond $1.20809 (50day Exponential Moving Average) would trigger breakouts beyond the first massive hurdle ($1.2196) to target the 2nd resistance of $1.2241. Conversely, slumps below the first support ($1.2108) would drag GBP-USD towards the 50day and the 100day Exponential Moving Averages. Losing the 50day EMA would authorize bearishness for the currency pair.

The United States Session

It remains a calm Wednesday on the United States economic calendar without notable statistics for market players to contemplate. That will leave the GBP-USD under the influence of the market risk sentiment and the FOMC staff chatter.

Federal Chair Jerome Powel left investors flat-footed after refraining from policy discussion on Tuesday. With the impending United States CPI on Thursday, expectations of another inflation drop would support GBP-USD ahead of U.K. economic signals on Friday.

FedWatchToll indicated a 79.2% chance of a 25bp rate increase today morning. However, hotter-than-anticipated CPI data on Thursday may tilt the narrative, attracting a 50bp move.

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