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GBP/USD currency pair moved in a rather stable manner during the whole period of previous trading week and managed to close the week almost on the opening level of Monday. The Pound started with a minor decline on Tuesday, reaching 18-month lows after data showed the annual rate of inflation in the UK slowed to the lowest in 14 years in December. The UK's CPI dropped to 0.5% in December on the annual basis. Economists believe that further declines could make the situation similar to the Eurozone, where deflation has become a strong headache for policy makers. Moreover, the slowdown in inflation underlined expectations that the BoE will keep interest rates on hold at record lows for most of this year. Nevertheless, the Pound was pushed higher and managed to reach the 1.5249 level on Wednesday, since the dollar showed little reaction to data from Thursday, implying that the number of people who filed for unemployment assistance in the US last week rose to a four-month high of 316,000. A separate report showed US producer prices fell by most in three years in December, falling 0.3% as energy costs tumbled.
Following the negative development of the pair during January 5-9 week, participants of our weekly Community Forecasts quiz decided to become more bearish on the Cable. The average prediction, in turn, is now located at 1.5160 level, just below the Tuesday's daily S3 support line. Among important fundamental factors from Britain, traders can pay attention to Bank of England's monetary policy minutes of MPC's last meeting, which will be published on Wednesday. Also, retail sales data is likely to be useful and is going to be released a day later. Concerning the US side, Markit Manufacturing PMI as well as existing home sales will both be announced on Friday.
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