GBP/USD inches toward 1.30 after US CPI inflation runs hot

• GBP/USD churned on Thursday, giving up a tenth of a percent.
• US CPI inflation data came in above expectations, vexing rate cut hopes.
• Coming up on Friday: UK GDP and production figures, US PPI and UoM sentiment.

GPB/USD roiled on Thursday, battling just north of the 1.3000 handle before trimming 0.1% for the day. The Greenback was bolstered by a misfire in US Consumer Price Inflation (CPI) inflation figures, which printed hotter than markets expected. A raft of UK and US data is due on Friday, giving the Cable a tense finish to an otherwise quiet week.

Headline US CPI inflation fell less than expected through the year ended in September, declining from 2.5% to 2.4%. Median market forecasts had called for a print of 2.4% YoY. On the other hand, core US CPI inflation ticked higher YoY in September, rising to 3.3% from the previous 3.2%. 

US Initial Jobless Claims unexpectedly rose for the week ended October 4, climbing to 258K week-on-week and clipping the highest rate of new jobless benefits seekers since June of 2023. 

Mixed rate-impacting data flummoxed rate markets on Thursday. Rising unemployment figures bolster hopes for rate cuts as the Federal Reserve (Fed) looks to keep the US labor market afloat, while still-hot inflation makes it harder for investors to expect a faster pace and depth of rate trims.

Friday delivers a packed data docket for Cable traders. UK Gross Domestic Product (GDP) figures for August will kick things off, expected to increase to 0.2% MoM in August from the previous month’s flat print of 0.0%. UK Manufacturing and Industrial Production are both expected to rebound in August. Manufacturing Production is expected to recover to 0.2% MoM compared to the previous -1.0% contraction, while Industrial Production is forecast to bounce to 0.2% MoM from the previous -0.8%.

US Producer Price Index (PPI) inflation will follow up during the US market session. September’s core PPI print for the year ended in September is expected to accelerate to 2.7% YoY from last month’s 2.4%.

GBP/USD price forecast

The GBP/USD pair is currently trading at 1.3056, showing a minor drop of 0.11% for the day. The price action suggests a bearish trend emerging after a period of consolidation near the 50-day Exponential Moving Average (EMA), currently at 1.3108. The pair recently broke below this key technical level, indicating further downside momentum. The 200-day EMA, at 1.2840, acts as a crucial support zone, which could be tested if selling pressure continues to mount. The bearish candlestick patterns in recent sessions support the view that sellers are in control.

The Moving Average Convergence Divergence (MACD) indicator further supports the bearish outlook. The MACD line has crossed below the signal line, with the histogram showing increasing negative bars. This suggests that the downside momentum is picking up strength. The pair may struggle to break above the 50-day EMA in the short term, which has now become a resistance level. Should the current downward trend persist, the next area of interest for traders would likely be the psychological 1.3000 mark, followed by the 1.2840 support level near the 200-day EMA.

In the broader context, GBP/USD’s price action appears to be in a corrective phase after its significant uptrend from July to early September. The pair's recent highs around 1.3400 now look increasingly distant as downside risks dominate. With the MACD reinforcing the bearish signal and the price failing to hold above the 50-day EMA, further declines seem likely unless a significant reversal occurs. Key upcoming economic data, including inflation reports and central bank decisions, could play a pivotal role in determining the pair’s next move.

GBP/USD daily chart