GBP/USD remains stable at approximately 1.3510 during the early Asian session on Friday. The US Producer Price Index increased by 5.4% year-over-year in August, surpassing expectations. BoE’s Bailey countered the notion that a rate hike is unavoidable. The GBP/USD pair is currently exhibiting a stable performance, hovering around 1.3510 in the early hours of the Asian session on Friday. Traders are opting to remain on the sidelines in anticipation of the crucial US August Consumer Price Index inflation report scheduled for release later on Friday. The US Producer Price Index, which serves as an indicator of wholesale prices and a reflection of cost pressures within the supply chain, increased by 5.4% year-over-year in August, up from 4.8% in July, as reported by the Bureau of Labour Statistics on Thursday. This figure exceeded expectations of 5.3%.
In August, the headline PPI experienced a monthly increase of 0.4%, aligning with market expectations. The core PPI increased by 0.2%, which is marginally below expectations. Traders are poised for the release of the US CPI inflation data on Friday, as it may provide insights into the trajectory of US interest rates. Economists anticipate that the headline CPI will exhibit a 3.4% increase in August, whereas the core CPI is forecasted to rise by 2.4% in the same timeframe. If the reports indicate outcomes that exceed expectations, this could strengthen the Federal Reserve’s rate hike expectations and elevate the US Dollar against the British Pound in the short term. Bank of England Governor Andrew Bailey stated earlier on Tuesday that he aimed to clarify the misconception that a central bank interest rate increase is inevitable, emphasising instead that such a decision is contingent upon economic and geopolitical factors. Markets anticipate a quarter-percentage-point increase in the Bank of England’s rate by the end of this year, with expectations for two additional hikes by 2027, as reported.
Strategists flag that upcoming UK data will be a key catalyst for Sterling, noting that “next week’s jobs and CPI figures offer additional risk into Thursday’s BoE, where policymakers are widely expected to deliver a hawkish hold.” They emphasize that “next week’s BoE is a nonMPR (forecast) meeting, leaving the November 5th rate decision as the next likely meeting for a 25bpt rate hike-with short-term rates markets already pricing ~19bpts of tightening for the decision.” At the same time, Scotiabank highlights that “fiscal concerns remain front and center in terms of sentiment, as we continue to highlight the importance of the budget scheduled for late October,” but they add that “the trend in sentiment remains constructive for the GBP.” In the daily chart, GBP/USD exhibits a consolidation phase characterised by a neutral, range-bound position. The pair remains positioned above the 100-day Simple Moving Average, with intraday price action fluctuating slightly above the lower Bollinger Band support, suggesting a persistent demand during price declines.
However, the Bollinger middle band constrains the upper range alongside the upper band, while the Relative Strength Index hovering around 48 indicates only limited, non-directional momentum. On the upside, initial resistance is situated at the Bollinger middle band near 1.3560, with a breach there revealing the upper Bollinger Band around 1.3655 as the subsequent barrier. On the downside, immediate support is observed at the lower Bollinger Band at 1.3465, followed by a stronger cushion provided by the 100-day SMA at 1.3445; a daily close beneath this latter level would undermine the existing consolidation bias and pave the way for a more pronounced correction.
