The Pound Sterling reached a four-month high at 1.2980 against the US Dollar following the release of a softer US Consumer Price Index (CPI) report. Year-over-year headline inflation decreased to 2.8%, while core CPI fell to 3.1%.
Market expectations suggest the Federal Reserve may resume policy easing after it paused in December. Despite the soft CPI data, the US Dollar Index increased to near 103.75, up from a low of 103.20.
Uk Economic Data And Bank Of England Outlook
As the UK prepares for upcoming GDP and production data, the Bank of England is expected to maintain interest rates at 4.5%. The UK economy is projected to have grown by 0.1% in January, down from 0.4% in December.
The long-term outlook for the Pound Sterling remains positive, as it trades above the 200-day Exponential Moving Average. Support levels are identified at 1.2767 and 1.2608, while resistance is noted at the psychological mark of 1.3000.
The Pound Sterling has climbed to its highest level in four months, touching 1.2980 against the US Dollar. This upward movement came after inflation data from the United States showed signs of slowing, with annual headline inflation easing to 2.8% and core CPI declining to 3.1%.
With inflation moderating, markets are pricing in the possibility that policymakers in the US could restart rate cuts, having paused in December. However, even with softer inflation figures, the US Dollar Index saw a bounce back toward 103.75 after slipping as low as 103.20. This suggests that investors have not entirely ruled out a cautious stance from the Federal Reserve.
Attention now shifts to economic data from the UK. Growth figures along with production numbers are due, and these could influence market sentiment in the short term. Expectations are that officials at the Bank of England will keep rates at 4.5%, with GDP forecasted to have expanded by just 0.1% in January, slowing from 0.4% in December.
Technical Analysis And Key Levels
From a technical standpoint, Sterling remains in a strong position, trading above the 200-day Exponential Moving Average. Levels to watch include support near 1.2767 and 1.2608, while the 1.3000 mark could serve as a psychological barrier for further gains. Traders entering positions now should account for these thresholds, particularly given the data-heavy calendar ahead.
