British Pound falls to 1.2505

UK inflation data contributes to Pound depreciation

16 November 2023

  • UK inflation at slowest pace in 2 years in October.

  • British pound falls from 2-month high of 1.2505 vs US dollar.

  • UK core inflation rises around 4.6% annually.

Economic developments impacting the movement of the British Pound

The British pound has experienced a decline against major currencies, surrendering its two-month high against the US dollar for the second consecutive session. This shift follows the release of crucial inflation data in the United Kingdom, indicating a slower increase in inflation rates during October. As a result, the likelihood of an interest rate hike has diminished, with expectations now leaning towards early interest rate cuts in the UK in 2024.

The Office for National Statistics reported that the UK's headline inflation rate rose by approximately 4.6% annually in October, marking the slowest increase since October 2021 and falling below market expectations of 4.7%. This figure contrasts with the 6.7% increase recorded in September.

In October, the core inflation of the Consumer Price Index also rose by around 5.7% annually, down from September's 6.1% and below market expectations of a decrease to 5.8%. These data indicate reduced inflationary pressures on policymakers at the Bank of England, lowering the likelihood of additional increases in British interest rates and supporting the notion of the conclusion of the monetary tightening cycle.

British Prime Minister Rishi Sunak emphasized the need to persist in reducing inflation to the medium-term target of 2%.

In trading, the British pound started the day with a slight decline against the US dollar, hovering near the level of 1.2391 dollars.

Key pivot and technical levels affecting British Pound against US Dollar:

Having tested the resistance level of 1.2500, representing the upper limit of the ascending channel but failing to surpass it, the pair has retraced and is currently trading around 1.2390. There's a possibility of further decline to test the support level of 1.2300 and levels of 1.2270, which denote the lower limit of the ascending channel.

If the pair manages to surpass the level of 1.2425, this could contribute to additional upward movement, potentially retesting the resistance level of 1.2500 once again.

GBPUSD 16-11-2023