- GBP/USD picks up bids to refresh intraday high during the first positive day in four.
- Record high UK fresh food prices, hawkish statements from BOE’s Bailey favor buyers.
- China-linked optimism adds strength to the corrective bounce.
- The cautious mood ahead of Fed Chair Powell’s first speech since November FOMC tests buyers.
GBP/USD cheers upbeat inflation signals, as well as the market’s cautious optimism while snapping a three-day downtrend near 1.2000 during early Wednesday morning. Even so, the Cable pair traders remain cautious ahead of the key data/events.
As per the latest data from the British Retail Consortium (BRC), the cost of fresh food sold in British shops increased in November at the fastest annual rate since records began in 2005, to 14.3% per Reuters.
Other details from the news mentioned, “Other food item prices surged at the fastest pace on record to 12.4% in November, up from 11.6% the month before. Overall shop price inflation rose to 7.4%, a record for the index which started 17 years ago, and up from 6.6% in October.”
On Tuesday, Bank of England Governor Andrew Bailey said that the UK labor market has turned out to be much more constrained than we thought. Before him, BOE Policymaker Catherine Mann said, “Medium-term inflation expectations are very important for my assessment of where bank rate should go.”
Other than the likely aggressive BOE, easing Covid fears from China also seemed to have underpinned the GBP/USD pair’s latest rebound. That said, the dragon nation registered the second consecutive fall in daily infections, to 37,828 at the latest. Previously, China announced multiple measures to ease the strict lockdown in the key areas after witnessing a retreat in the daily Covid infections from a record high. Even so, the world’s second-largest economy kept its Zero-Covid policy intact. Bloomberg reported the reopening of some city buildings in the greater Zhengzhou region, the home of a key iPhone plant. Earlier on Tuesday, the news broke that China’s Guangdong province will allow the close contacts of Covid cases to quarantine at home.
On the same line could be the softer US Conference Board (CB) Consumer Confidence Index for November which dropped to 100.2 versus 102.2 prior (revised down from 102.5).
It should, however, be noted that the hawkish hopes from Fed Chairman Jerome Powell, mainly due to the latest hawkish rhetoric among the policymakers seem to test the GBP/USD pair buyers. Additionally challenging the pair buyers could be the fears of a nationwide strike of the UK government employees and fears of recession due to the latest changes in the fiscal policies.
Other than the Fed’s Powell, an early signal for Friday’s United States Nonfarm Payrolls (NFP), namely the ADP Employment Change for November, as well as the second readings of the United States Gross Domestic Product (GDP) for the third quarter (Q3) will also be important for the GBP/USD pair traders to watch.
Despite the latest rebound, the support-turned-resistance line from November 09 and the 200-DMA, respectively near 1.2130 and 1.2160, challenge the GBP/USD bulls.