GBPUSD resumes drop after UK inflation turns to negative

UK CPI inflation turns negative fxcommentThe GBPUSD resumed its retreat against the U.S. dollar after a report showing U.K. inflation fell into negative territories for the first time since 1960.

U.K. consumer prices index dropped 0.1 percent in the year ended April from both prior and expected flat readings.

The pound widened its losses versus the green currency after the report, as it raised expectations the BOE may push back the timing of its first interest rate hike in six years.

Inflation may fall below the current 0 percent in the coming months, where it will not pick up again to the bank’s target of 2 percent before 2017, BOE quarterly inflation report released last said.

The BOE also revised down its growth forecasts for 2015 to 2.5 percent from 2.9 percent estimated in February.

However, the drop in inflation may be temporary as the recovery in oil prices and the strength of the sterling may help inflation to rise again.

Brent crude gained 21 percent in April to resume its rebound from a low of $46.39 a barrel touched in January.

The pound edged up around 3.6 percent versus the dollar in April, taking advantage of the uncertainty regarding the timing at which the Fed would raise its borrowing cost.

The GBPUSD is meanwhile trading around 1.5553 after hitting a bottom of 1.5527, where it is currently trading below this week’s pivot point depicted at 1.5642.

The pair resumed its drop for a third straight session to reach 23.6 percent Fibo support for the upside wave which began on April 13.

The RSI 14 momentum indicator signaled a downside correction after entering overbought areas.

GBPUSD CPI inflation fxcomment

Ahmed Mamdouh

Ahmed Mamdouh, Co-Founder and Head of English Fundamental Analysis at, with 7 years of experience in the financial markets. Mamdouh holds a Master’s Degree in Economics from The American University in Cairo and a Bachelor Degree in Economics from The Faculty of Economics and Political Science, Cairo University.

You have to be logged in to comment.