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

Market Report

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 yesterday, 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 SMA on the hourly chart and halted its decline upon touching the 20-period MA on the daily chart. Since the GBP/USD pair has risen significantly since the start of this month and this decline came 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 from 8.7% the previous month to 7.9%. 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 the GBP/JPY pair is trading below its 20-day moving average, we will wait and see whether the downtrend 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 focused primarily on foreign exchange markets and has experience as an asset management advisor. Drawing on his extensive experience, he specializes in technical and fundamental analysis.

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