The GBP/USD price held steady in the morning session as traders waited for the upcoming UK consumer inflation data. The pair is trading at 1.3805, which is slightly below its highest level since September 16.
UK consumer inflation data
The Office of National Statistics (ONS) will publish the latest consumer and producer inflation data on Wednesday morning. Economists polled by Reuters expect the data to show that the headline CPI rose by 3.5% in September after rising to 3.2% in the previous month.
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The core CPI, which excludes the volatile food and energy prices, is expected to have risen 3.0% in September, down from 3.1% in the previous month. The figure will be substantially higher than the Bank of England (BOE) target of 2.0%.
Consumer and producer prices have been rising in most countries for several reasons. First, many companies have been forced to hike their wages because of the ongoing labour shortage. Recent data showed that the UK wage growth rose by about 5.6% in August.
Second, there have been significant parts shortages, especially in the automobile and electronics industries. The most important shortages are in computer chips, which are essential in running key devices. Unfortunately, these shortages are expected to continue for several months ahead.
Third, in the UK, there are some challenges about Brexit. The UK has demanded new talks with the EU about the sections on Northern Ireland. These challenges have led to some shortages, which have contributed to higher prices.
Most importantly, the cost of most commodities has soared in the past few weeks. For example, the price of crude oil has jumped to the highest level in eight years while natural gas has risen to a record high.
Therefore, the GBP/USD pair has risen since the trends in inflation and employment will likely push the Bank of England (BOE) to shift its strategy on interest rates.
GBP/USD forecast
The four-hour chart shows that the GBP/USD pair has been in a strong bullish trend in the past few weeks. The pair is being supported by the 25-day and 50-day moving averages. It also moved above the key resistance level at 1.3750, which was the highest level on September 23rd.
Therefore, the pair will likely keep rising as bulls target the next key resistance level at 1.3915, which was the highest level on 14th September.
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