gbp-usd
GBPUSD Climbs for the 100 SMA, Despite Softer BRC Shop Price Index
Skerdian Meta•Tuesday, May 28, 2024•2 min read
The GBP to USD rate has been less volatile over the past two weeks, but the GBP/USD price action suggests that there is still upside momentum, with the price moving towards the 100 SMA (red), which serves as support for this forex pair. The GBP/USD exchange rate is being sustained by the weaker US CPI and the higher UK inflation.
GBP/USD Chart Weekly – The 100 SMA Held As Support![](data:image/svg+xml,%3Csvg%20xmlns='http://www.w3.org/2000/svg'%20viewBox='0%200%20800%20500'%3E%3C/svg%3E)
Earlier this month, we saw the UK Consumer Price Index (CPI) inflation for April came in at 2.3% annually, surpassing market expectations by 2.1%, while core CPI rose to 3.9%, exceeding analysts’ forecasts of 3.6%. Meanwhile, both headline and core inflation in the US experienced declines in April.
The lower-than-expected inflation in the US increased the likelihood of an imminent interest rate cut by the Federal Reserve (Fed), however, it’s worth noting that the Fed has not yet provided a clear timeframe for any potential rate adjustments, leaving some uncertainty in the market. The prospect of the Fed maintaining its current interest rate level for the time being has provided support for the GBP/USD currency pair, sustaining its upward trend.
British Retail Consortium (BRC) Shop Price Index
- The British Retail Consortium (BRC) Shop Price Index for May 2024 showed a decline to 0.6% year-on-year, falling short of the expected 1.0% and down from April’s 0.8%.
- BRC Chief Executive Helen Dickinson commented on this drop, noting that shop price inflation has returned to more normal levels.
Key Points:
- Inflation Dynamics: Ambient food inflation remains high, particularly for sugary products due to elevated global sugar prices. In contrast, non-food retailers have cut prices on items such as furniture to stimulate consumer demand, which has been particularly sluggish for big-ticket items.
- Consumer Sentiment: There has been “some improvement” in consumer sentiment, suggesting a cautious optimism among shoppers.
- Event-Driven Discounts: Retailers are also offering discounts on TVs and other audio-visual equipment in anticipation of the upcoming Euros, which is contributing to the lower inflation figures.
Implications for Bank of England Policy:
With shop price inflation normalizing, the Bank of England may consider rate cuts sooner than previously expected. The market is currently pricing in the possibility of rate cuts in June or August. This potential shift in monetary policy is influenced by the current inflation trends and improving consumer sentiment, which could help support economic activity in the near term.
GBP/USD Live Chart
GBP/USD
Skerdian Meta
Lead Analyst
Skerdian Meta Lead Analyst.
Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.
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