Sterling extended its rise slightly after adding values for a third straight day amid a strong CPI is underlining that U.K. economy remains in a robust pace of growth. While the strong performance of the GBP/USD is also buoyed by the declining greenback.
The technical movement for pound closed as a “cross line”, which likely shows that a potential reversal of current movement will occur due to significant resistance ahead, but what investment decision should be made by investors depends on how it moves next.
British Consumer Price Index (YoY) was in line with its forecast of 3.0 percent, ticking lower in December and pulling from previous month’s six-year high at 3.1 percent. Core inflation was set to 2.5 percent, beaten by expectation (2.6 percent). Government house price data suggest that the modest lift to prices nationally in the past few months is extending (+5.1% y/y, down slightly from an upwardly revised +5.4%) while London house price growth remains soft (+2.3%).”
The slower-than-forecast inflation rate would slow the path for the Bank of England (BoE) to raise interest rates, which may not make a rise in GBP sustainably.
The broader outlook for the GBP/USD seen from the daily chart is quite positive currently, as it is moving along with the developing ascending channel started from earlier last year. In particular, the breakout of important Fibonacci barrier (61.8%) could lead to further rise over the long term, which can be a support for a possible pullback later.
With MACD applied, the indicator is also in an upside momentum, signalling that the pair would keep the momentum, and this is a good entry for investors.
Figure 1: GBPUSD Daily
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