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The outlook for the pair is bearish ahead of the upcoming UK inflation data and Fed chair testimony.Â
Bearish View
- Sell the GBP/USD pair and set a take-profit at 1.2150.
- Add a stop-loss at 1.2350.
- Timeline: 1-2 days.
Bullish View
- Set a buy-stop at 1.2295 and a take-profit at 1.2350.
- Add a stop-loss at 1.2200.
The GBP/USD price continued to consolidate as investors waited for the upcoming UK consumer and producer inflation data. The pair also reacted mildly to the ongoing strike by rail workers. It was trading at 1.2271 on Wednesday morning.
UK Inflation Data Ahead
The UK economy is going through numerous challenges. The most important one is that the country’s consumer and producer inflation is soaring as the crisis in Ukraine continues. It is estimated that this inflation will push the average food bill by £380 this year.
The Office of National Statistics (ONS) will publish the latest UK CPI and PPI data on Wednesday morning.
Economists polled by Reuters expect the data will show that inflation is still surging. The median estimate is that inflation rose from 9.0% in April to 9.1% in May. If analysts are accurate, it will be the highest increase in decades.
On the positive side, analysts expect that the headline and core inflation eased slightly on a month-on-month basis. In its meeting last week, the Bank of England warned that inflation will rise to over 10% in the coming months.
Meanwhile, UK producers are expected to see elevated costs. The PPI input and output are expected to have risen by 19.4% and 14.7%, respectively.
These numbers will come at a time when the transport sector in the UK is going through turmoil. Over 40,000 rail workers went in the biggest strike in over 30 years. The three-day strike is expected to have some impact on the country’s inflation.
The GBP/USD pair will react to the upcoming testimony by Jerome Powell. The Fed Chair will be quizzed by Senators on the state of the economy and actions that the bank is doing. It will be his first grilling since the Fed decided to hike rates by 0.75%.
GBP/USD Forecast
The GBP/USD pair continued to consolidate ahead of the upcoming UK consumer inflation data. It is trading at 1.2270, where it has been in the past two straight days. The pair remains slightly above the standard pivot point and is also consolidating along the 25-day and 50-day moving averages.
It has also formed a small rising wedge pattern. Therefore, the outlook for the pair is bearish ahead of the upcoming UK inflation data and Fed chair testimony. The key support to watch will be at 1.2150.
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