With CPI falling to 7.9%, will the market wait and see how much further the pound might drop?
20.07.2023
- Germany: Producer Price Index
- U.S. Initial Jobless Claims
In yesterday’s U.S. currency trading, the U.S. dollar rose against the pound. The GBP/USD pair fell from 1.3040 to 1.2867. It broke well below the 200-period simple moving average (SMA) on the hourly chart and halted its decline upon touching the 20-period moving average (MA) on the daily chart. Given that the GBP/USD pair has risen significantly since the start of this month and this decline comes immediately after it hit a new high for the year, we will need to assess the market direction to determine whether this corrective movement will continue for a while.
Following yesterday’s CPI release, the pound fell by approximately 1.8 yen against the yen after the year-on-year rate dropped to 7.9% from 8.7% the previous month. The GBP/JPY pair fell from 181.645 to 179.826, dropping sharply immediately after the CPI announcement.From a technical perspective, since GBP/JPY is trading below the 20-day moving average on the daily chart, we will wait and see if the downward trend continues for the time being.
Today, during Asian trading hours at 15:00, we have Germany’s Producer Price Index, Switzerland’s trade balance, and Japan’s machine tool orders; during European trading hours at 16:00, Turkey’s Consumer Confidence Index; at 20:00, the TCMB policy rate and statement; and during U.S. trading hours at 21:30, U.S. initial jobless claims and the Philadelphia Fed Business Outlook Index;at 11:00 PM, U.S. Existing Home Sales and the U.S. Leading Economic Index, and at 11:30 PM, U.S. Weekly Natural Gas Inventories. We will be closely monitoring the downside potential for the pound, which has been declining amid falling CPI figures.
Author: Keisuke Sakurai
