Bullish view
Buy the GBP/USD pair and set a take-profit at 1.3500.
Add a stop-loss at 1.3225.
Timeline:1-2 days.
Bearish view
Sell the GBP/USD pair and set a take-profit at 1.3225.
Add a stop-loss at 1.3500.
The GBP/USD exchange rate wavered after the UK published the latest consumer and producer inflation report. It was trading at 1.3365 on Thursday morning, inside a range it has been in the past few days.
UK Inflation Remained Steady Before Iran War
A report by the Office of National Statistics (ONS) showed that the UK consumer and producer inflation remained elevated before the ongoing Iran war.
The report showed that the headline Consumer Price Index (CPI) rose from minus 0.5% in January to 0.4% in February. This increase led to a 3% annual increase.
Core inflation, which excludes the volatile food and energy prices, rose from minus 0.6% to 0.6%. It moved from 3.1% in January to 3.2% in February.
More data showed that the Retail Price Index (RPI) slowed to 3.6% from the previous 3.8%. These numbers are much higher than the Bank of England’s target of 2.0%.
Inflation will likely remain elevated in the coming months because of the rising price as the war continues. Data shows that UK gas prices have jumped to £52, up by 77% year-to-date and 66% in the last 30 days.Crude oil prices have also jumped substantially since the war started.
The challenge for the Bank of England (BoE) is that the UK is facing a stagflation, which is a period of high inflation and slow economic growth.
The next key catalyst for the GBP/USD pair will be the upcoming UK retail sales report on Friday. Economists expect the upcoming report to show that the headline retail sales jumped from 2.1% in January to 4.5%, while core sales rose by 5.5%.
GBP/USD Technical Analysis
The daily timeframe chart shows that the GBP/USD pair was trading at 1.3362 on Thursday, a few points below this week's high of 1.3473. It remains much lower than the year-to-date high of 1.3865.
The pair has moved slightly below the 50-day Exponential Moving Average (EMA). Also, the Relative Strength Index (RSI) has stalled below the neutral point at 50.
Therefore, the pair will likely remain in a narrow range in the coming days. The key support and resistance levels to watch will be at 1.3223 and 1.3475. A move above the resistance will point to more gains, potentially to the psychological level at 1.3600.