GBP/USD darts lower after strong US June inflation data

By: Crispus Nyaga
Crispus Nyaga
Crispus is an active trader, where he is followed and copied at Capital.com. He lives in Nairobi with his… read more.
on Jul 13, 2021
  • The GBP/USD pair declined after the latest US inflation data.
  • The headline CPI rose by more than 5.4% in June.
  • Focus shifts to the latest UK CPI and US PPI data scheduled for Wednesday.

The GBP/USD declined on Tuesday as investors reacted to the latest US consumer inflation data and as the Delta variant continued to spread. The pair fell to 1.3840, which was 0.50% below the highest level this week.

US consumer inflation data

Consumer prices in the US rose in June as the country continued recovering. According to the Bureau of Labour Statistics (BLS), the headline CPI rose by 0.9% in June after rising by 0.6% in the previous month. This increase led to a year-on-year increase of 5.4%, which is significantly above the Federal Reserve’s target of 2.0%.

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Further data showed that core CPI, which excludes the volatile food and energy prices, rose by 0.9% in June after rising by 0.7% in May. This led to a YoY increase of 4.5%, which is the highest level in more than a decade.

Consumer prices have surged helped by strong demand as the American economy reopens. Further, there has been an ongoing gridlock in shipping as more countries continue buying from Asia. Indeed, data published by China showed that its exports and imports rose by 32.2% and 36.7%, respectively. The prices of electronics and cars has risen because of the ongoing chip shortage.

The BLS will publish the latest US PPI data on Wednesday. Economists expect the data to show that the headline PPI rose by 0.6% on an MoM basis leading to a 6.8% annualised increase.

Looking ahead, the GBP/USD will react to the latest consumer inflation data from the UK that will come out on Wednesday. The data is expected to show that the UK CPI rose by 2.2% in June after rising by 2.1% in May. The core CPI is expected to rise by 2.0%. 

GBP/USD technical analysis

GBP/USD
GBP/USD chart

The four-hour chart shows that the GBP/USD pair declined substantially after the latest US inflation data. It has moved to the 50-day and 25-day exponential moving averages (EMA). The pair also seems like it has formed a double-top pattern, which is usually a bearish signal. 

Therefore, the pair will likely keep falling as bears target the next key support at 1.3740, which was the lowest level on July 8. On the flip side, a move above 1.3950 will invalidate this prediction.

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