The GBPUSD currency pair is moving within the medium-term uptrend. Last week, the quotes returned to early 2025 levels. Now the pound to dollar ratio is on its way to December highs and the 1.277 mark. Although technical indicators are approaching the overbought state, the bulls do not intend to retreat. The latest news from the UK favor further strengthening of the national currency.
January’s inflation data released on Wednesday was definitely not pleasant for holders of short positions on the pound. In the United Kingdom, price growth accelerated from 2.5% to 3%, noticeably surpassing the analysts’ forecast of 2.8%. Services inflation jumped even more sharply, from 4.4% to 5%. Zara Nokes of J.P. Morgan Asset Management considers reforms of the new government to be the main reason of rising inflation. The British government raises taxes and minimum wage, which has an immediate impact on price levels.
A Reuters poll showed that the market expects the Bank of England to cut interest rate two more times following February’s cut. The Bank estimates that inflation will be accelerating until the third quarter of 2025 and its highest level will be 3.7%. This forecast has little to do with the prospects for further monetary easing. Economist at Capital Economics Ruth Gregory points to the high possibility of the Bank of England officials tightening their rhetoric at the meeting on March 20.
This stance is supported by the improving labor market in the UK. Today’s report by the Recruitment & Employment Confederation showed that the number of job openings in the United Kingdom rose to 1.52 million in January, which is the highest since June last year. Although January’s statistics traditionally shows an increase, it is important to pay attention to the growth pace. The number of job openings in January is 34.4% higher than it was in December. The increase was less than 28% a year ago.
The RSI is gradually approaching overheating, but no reversal signal has been formed yet. The correction of GBPUSD may start after reaching the level of 1.277.
Consider the following trading strategy:
Buy GBPUSD at the current price. Take profit – 1.277. Stop loss – 1.25.
This content is for informational purposes only and is not intended to be investing advice.
