GBP/USD movement only upwards

01/14/2023

2 minutes read

2023.01.14 02:05

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MarketPulse

GBP/USD movement only upwards

On Friday, the British pound is slightly higher. is up 0.24 percent at 1.2234. With gains of 1.2%, the pound has had a good week.

In December, inflation in the United States slowed for the sixth month in a row. decreased to 6.5 percent, matching the estimate and down from 7.1%. Lower prices for new and used automobiles, as well as gasoline, fueled the drop. showed a similar pattern, decreasing to 5.7% from 6.0%, which was in line with the forecast. Any member of the Fed will quickly point out that inflation is still significantly higher than the Fed’s 2% target and is slowing coming down. Still, inflation is heading in the right direction as the economy is feeling the effects of the Fed’s aggressive tightening cycle.

Despite the fact that the inflation data came in as expected, the markets were nonetheless pleased, and losses persisted throughout Thursday. Additionally, the Fed was pleased with the downward trend in inflation. Harkins, a member of the Fed, stated after the inflation report that he supports a 25-basis-point hike at the meeting in February and anticipates that rates will rise “a few more times this year,” with a 25-bp pace being appropriate.

This sounds like a recognition that inflation has reached its peak. However, no Fed official will use the “P” word for fear that the markets will go overboard and loosen conditions, which would make the fight against inflation more difficult. In February, additional Fed members expressed support for a 25-bp increase, and the odds of a 25-bp increase are 93%, according to CME’s FedWatch. A 25-bp increase appears to be a done deal, unless something unexpected happens.

The UK saw a 0.1% increase in November, which was higher than the 0.2% predicted but lower than the 0.5% read for October. The overall picture is bleak, with a -0.3% decrease in the three months leading up to November. The UK economy is slowing down, and the Bank of England must keep raising interest rates in order to reduce high inflation despite the weak economy. The BoE will meet again on February 2.

GBP/USD Daily Chart