Britain’s inflation rate fell for the third consecutive month in January, boosting optimism that the cost of living crisis has peaked and prices will fall sharply later this year. This increased the downward pressure for the performance of the GBP/USD currency pair, with losses towards the 1.1989 support level. It is breaching the important psychological support of bear control 1.2000 and settling around 1.2040 at the time of writing the analysis, prior to the announcement of the last important US economic data package for this week.
The Office for National Statistics said on Wednesday that British inflation fell to 10.1% in the 12 months to January, from 10.5% in the previous month. The consumer price index peaked at 11.1% in October. The Bank of England expects that prices will fall rapidly in the second half of this year as energy costs begin to moderate and price increases from Russia’s invasion of Ukraine seep out of the inflation accounts.
But the numbers offer no immediate relief to consumers who have been squeezed by inflation that has remained at levels last seen in the early 1980s. The country has seen a wave of strikes in recent weeks as public sector workers, from train drivers to teachers, nurses, and paramedics, demand higher wages. Commenting on this, Albish Baliga, chief economist at the Confederation of British Industry, said: “A further decline in inflation during January indicates that the tide is turning on price pressures.” “But with inflation pressures and the cost of pipelines still rising this year, households and businesses will likely feel the pain for a while yet.”
While declines in the cost of transportation, clothing and restaurant meals helped push inflation lower last month, consumers are still suffering from higher food and energy prices. Food prices rose 16.8% in the year through January, down slightly from the 16.9% figure reported in the previous month. Housing costs, which include gas and electricity, increased by 11.8%.
Price hikes in Britain have outperformed some other major economies. The United States saw annual inflation ease to 6.4% in January, while inflation in Europe slowed to 8.5%. And those rates are still high, and global central banks from the US Federal Reserve to the Bank of England are raising interest rates to calm inflation.
Sterling forecast against the dollar today:
- The general trend of the GBP/USD currency pair is still in a downtrend stage that supports the bears, moving below the psychological support level 1.2000.
- This is an opportunity for more bearish pressure is in place, and accordingly, the current shift may have the momentum to move towards the closest support which is 1.1960 and 1.1875, respectively.
- The recent performance of the GBP/USD confirms the success of our technical view of selling the GBP/USD pair from each ascending level.
On the other hand, the bulls must move towards the resistance level 1.2250 to control the performance again, otherwise the trend will remain bearish. The currency pair will be affected by the US economic data package, the Producer Price Index, the number of weekly jobless claims, the Philadelphia Industrial Index, and the US housing market numbers.
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