Following today's U.K. inflation report, the GBP/USD exchange rate is declining!
In case you missed it, the annual inflation rate for the United Kingdom was 8.7% in May, which was higher than the projected 8.4% increase in consumer prices but unchanged from the rate for April.
Additionally, it was the fourth month in a row that yearly prices increased faster than what the markets anticipated.
This is bad news for the Bank of England (BOE), which is working hard to keep prices stable after reaching an all-time high of 11.1% in October.
The possibility of additional BOE rate increases originally helped GBP relative to its important competitors.
However, some traders now believe Governor Bailey and his staff won't have much of an option except to boost interest rates even higher, increasing the likelihood of a U.K. recession.
GBP/USD has dropped to the 1.2760 levels after briefly reaching the psychological mark of 1.2800.
Could this indicate that Cable may experience fresh intraday lows?
The fact that the psychological level of 1.2800 is close to the 200 SMA and a trend line resistance that has been present all week on the 15-minute chart doesn't aid GBP bulls.
Furthermore, a rise to 1.2800 kind of corresponds with a halving of the daily average volatility of GBP/USD.
I'm banking on GBP/USD to continue its intraweek downturn because of concerns about a potential U.K. recession and my belief that Powell's speech will be at least somewhat hawkish.
In order to reach the GBP/USD's weekly lows at today's S1 (1.2720) levels, I'm looking at entries between the 1.2775 - 1.2780 trend line and 200 SMA resistance area.
How do you feel? Will the GBP/USD pair continue to decline?
Or will GBP/USD reach fresh weekly highs as a result of risk-taking and hawkish BOE expectations?
