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With CPI falling to 7.9%, will the market wait and see how much further the pound might fall?

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With CPI falling to 7.9%, will the market wait and see how much further the pound might fall?

20.07.2023

Today's Highlights
  1. Germany: Producer Price Index
  2. U.S. Initial Unemployment Insurance Claims

In the U.S. currency market the previous day, 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. Since the GBP/USD pair has risen significantly this month and this decline comes immediately after it hit a new high for the year, we need to assess the direction of the market to determine whether this corrective price movement will continue for a while.

Among European currencies, the pound fell by about 1.8 yen against the yen after yesterday’s CPI release showed a year-over-year decline to 7.9% from 8.7% the previous month. The GBP/JPY pair dropped from 181.645 to 179.826, falling sharply immediately after the consumer price index was announced.From a technical perspective, since GBP/JPY is trading below its 20-day moving average, we will wait and see whether the downward trend will continue for a while.

Today, at 15:00 Asia time, Germany’s Producer Price Index, Switzerland’s trade balance, and Japan’s machine tool orders will be released; during European trading hours, at 16:00, Turkey’s Consumer Confidence Index will be released, and at 20:00, the TCMB will announce its policy rate and statement;during U.S. trading hours at 21:30, U.S. Initial Jobless Claims and the U.S. Philadelphia Fed Business Outlook Index; at 23:00, U.S. Existing Home Sales and the U.S. Leading Economic Index; and at 23:30, U.S. Weekly Natural Gas Inventories.We will carefully monitor the downside potential for the pound, which is declining amid falling CPI figures.

桜井 慶介

Author: Keisuke Sakurai

He has over 10 years of experience in FX trading. In the financial sector, he has been involved in investment management with a particular focus on foreign exchange markets, and he also has experience as an asset management advisor. Drawing on his extensive experience, he specializes in technical and fundamental analysis.

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