'Bremain' votes kept providing support for the British currency on Tuesday, causing it to post gains across the board, even despite poor inflation figures. The Sterling appreciated the most against the Swiss Franc, namely 0.72%, while also adding 0.54% versus both the Loonie and the Japanese Yen. Other relatively solid gains of 0.46% and 0.42% were registered against the Euro and the US Dollar, respectively. At the same time, the UK Pound barely managed to advance versus the New Zealand Dollar, as the GBP/NZD surged only 0.13%. The Sterling, however, suffered a small decline 0.07% against the Aussie, which in turn was boosted by the RBA's Monetary Policy Meeting outcome.
Data on the UK inflation left analysts dissatisfied, falling short of expectations and showing the first dip in seven months. The Consumer Price Index rose 0.3% on a yearly basis in April, while economists had forecast the rate to remain unchanged at 0.5% from the month before. Monthly consumer prices advanced 0.1%, repeatedly missing analyst expectations of 0.3%, as the measure revealed a drop from previous month's 0.4%. Removing the effects of such volatile costs as food and fuel, the core inflation rate showed a leap in the predicted direction, nonetheless falling behind the expected 1.4% with a staggering 1.2%, compared to a 1.5% the month before. James Tucker, the head of CPI at the ONS claimed the main driver for the unexpected drop in inflation was the 14.2% dip in air fares that had climbed the month before, emerging from Easter holidays. The 0.4% shrinkage in clothing prices was named as another major contributor to the cutback in inflation.
The BoE said that a rise in inflation can be anticipated later this year due to a weaker Pound that should cause imported goods to become more expensive. The central bank expects a 0.9% inflation gain in the final quarter of the year, leading to a further 1.3% advance over next year's first quarter. While the expectations do not reach as far as achieving the 2% inflation target this year, the BoE is positive that the upward trend will extend and the UK will arrive at its target by mid-2018.
UK Labour Data and FOMC Meeting Minutes
GBP/USD on the edge of falling back under 1.44
The British Pound appreciated against the US Dollar for the second day yesterday, with the resistance area around 1.4482 managing to limit the gains. Today the pair is stuck between two clusters, namely the weekly and the monthly PPs from below, and the 20-day SMA and the weekly R1 from above. According to technical studies, however, the Cable is to edge lower, thus, a breach of the immediate support is likely to take place. Consequently, a drop under the 1.44 mark is then imminent, with focus shifting to the second demand area around 1.4340, represented by the 55 and the 100-day SMAs.
Daily chart
Hourly chart
Bears now in the majority
There are 52% of traders being long the Sterling today, compared to 49% on Tuesday. At the same time, the number of orders to sell the British currency declined from 71 to 55%.
At OANDA market sentiment slightly improved over the day, as 56% of their open positions are now long, compared to 53% on Tuesday. Meanwhile, the sentiment at SAXO Bank barely changed, as remain in the majority, taking up 56% of the market.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.46 in three months