British Pound: All Eyes on the Inflation Data

Fundamental Forecast for GBP: Neutral

Traders in the British Pound will be focused on Tuesday’s UK inflation data for June in the week ahead.

Broadly speaking, there is likely to be little change in either the headline inflation figure of 2.9% year/year or the core number of 2.6% but a small dip is possible and, either way, the steady climb in the growth of the consumer price index could now be near its peak.

That would certainly strengthen the position of the doves on the Bank of England’s monetary policy committee, who only just outnumbered the hawks pressing for an interest-rate increase at their last meeting. With news likely too in the coming week of stronger UK retail sales, the impact on the British Pound could well be negative.

However, GBP/USD is at an interesting technical juncture; pushing up again against strong resistance in the 1.3000/1.3100 area in late European trading Friday.

Chart: GBP/USD Five-Minute Timeframe (July 14, 2017)

British Pound: All Eyes on the Inflation Data

Chart by IG

So the key question is would a benign inflation print and stronger retail sales figures put the sellers back in control and send GBP/USD bouncing back off that resistance or will the resistance be broken, lifting GBP/USD into a new uptrend?

So traders should watch the charts closely. If the 1.30/1.31 resistance breaks, GBP/USD will almost certainly move higher. If it doesn’t, expect the pair to move lower. If the inflation data are higher, the MPC hawks will gain ground, helping the British Pound, but if they’re lower the currency will lose the gains it made last week.

--- Written by Martin Essex, Analyst and Editor

To contact Martin, email him at martin.essex@ig.com

Follow Martin on Twitter @MartinSEssex

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