GBP/USD experiences a decline, although the losses are contained despite disappointing UK CPI data. Analysts at Scotiabank examine the outlook for the currency pair.
Cable needs to extend through 1.2725/1.2735 resistance to strengthen
UK inflation figures fell short of expectations in February. Month-on-month CPI rose by 0.6% compared to an expected 0.7%, while year-on-year inflation decreased to 3.4% from a forecasted 3.5%, following January’s 4.0%. Core inflation also moderated to 4.5% year-on-year, slightly surpassing expectations, with services CPI at 6.1%, a tenth higher than anticipated. Despite this positive development, swaps indicate that the likelihood of rate cuts remains slim until at least August.
Support around or near Tuesday’s low of 1.2668 is expected to be robust. There’s a risk of further downside extension towards 1.2625/1.2635 below that level. However, for Sterling to gain strength, it must overcome resistance at 1.2725/1.2735, which has hindered upward movements in the past 24 hours.
