GBP to USD reached 40-year High


Fundamentals & News:

On 19th October, GBP/USD currency pair started its trading session at $1.1340. Throughout the day, the currency pair reached a high of $1.1351 and a low of $1.1247. Currently, the GBP/USD is moving at $1.1261 on a bearish note. The currency pair GBP/USD extended its downside momentum on Wednesday after the CPI report from the UK climbed to a 40-year high level. Furthermore, the US dollar strength also added pressure on the currency pair.

UK Inflation spiked to 10.1%

On Wednesday, the Sterling weakened amid the rise in the UK inflation level in September. The Consumer Price Index climbed to 10.1% on a yearly basis and reached a 40-year high level. Analysts believe that the rising inflation levels will only put pressure on the Bank of England to keep tightening the monetary policy. As a result, household incomes will continue to squeeze, causing another economic slowdown with time. Consequently, weighing on the British Pound eventually led to the downfall of GBP/USD.

US Dollar Index recovered its strength

On the other hand, the US Dollar Index (DXY), which measures the value of the greenback against the basket of six major currencies, surged 0.48% and reached the 112.66 level. After falling for two consecutive sessions, the greenback regained its strength amid the faded risk sentiment. This comeback of the dollar added extra pressure on riskier assets like GBP/USD, which was already drowning because of spiked inflation in the local country.

Meanwhile, the currency pair might change its momentum during the rest trading hours of the day. Although the economic data from Britain and dollar’s strength were keeping the currency pair under pressure, there are still chances that the pair could recover. The US economic docket is yet to release its reports. The Building Permits, Housing Starts and the Federal Budget Balance are scheduled for the day, which might affect the prices of the US dollar. In addition to this, the FOMC member, St. Lois Fed President James Bullard, will also give a speech that could impact the GBP/USD prices.

GBP/USD Technical Analysis

The daily technical analysis of GBP/USD is giving somewhat strong bearish patterns. According to Williams Percentage R and Stochastic RSI reading, the GBP/USD currency pair is moving in an overbought region. Therefore, there are potentially strong reversal signals in the market. It means that the pair is likely to continue its downward trend for the rest of the trading session.

However, the idea is to keep watching the pair decline further till $1.11627. If it drops down this level, traders might want to open a short trade.

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