GBP/USD climbed to a three-month high after UK inflation and labour data broadly matched forecasts and the dollar weakened. Traders trimmed bets on a Bank of England rate hike before year-end, while technical signals point to a possible short-term pullback.
GBP/USD surged to 1.3613 on Wednesday, its highest level in three months. The move came as investors digested fresh UK inflation and labour market figures alongside broad dollar weakness.
UK inflation accelerates, but stays on forecast
UK consumer inflation accelerated to 2.9% in July, up from 2.6% in June and in line with forecasts. Core inflation held steady at 2.6%. Following the release, markets slightly scaled back expectations of a Bank of England rate hike before year-end.
Earlier labour market data showed unemployment holding at 4.9%, above expectations, while the number of payrolled employees fell by 86,000 year-on-year. Growth in regular pay remained fairly stable at 3.5%.
Dollar weakness adds support
A weaker dollar is giving the pound additional support. Soft US economic data have led investors to reduce expectations of further Federal Reserve tightening. At the same time, elevated oil prices and uncertainty around the US-Iran conflict continue to pose inflation risks for the UK.
Technical picture points to a possible pullback
On the H4 chart, a wide consolidation range is forming around the 1.3523 level, with the market moving toward its upper boundary. A new compact range is expected to form below 1.3631. A downside breakout from this range would open the way for a move lower toward 1.3500. The MACD supports this scenario, with its signal line above zero and beginning to turn downward.
On the H1 chart, the market has formed a compact consolidation range around the 1.3607 level, extending between 1.3588 and 1.3618. A move lower toward 1.3572 is expected, followed by a move higher to 1.3600. The Stochastic oscillator confirms this scenario, with its signal line below 80 and trending downward toward 20.
Source: ActionForex
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