The British pound strengthens in the early European session on Friday, bouncing back from the previous day’s close amid the positive sentiment in the market.
According to the UK’s Office for National Statistics, UK’s Consumer Price Index (CPI) came at 7%, which exceeded the market expectations of 6.7%. The Core CPI was reported to be at 5.7%, higher than the market forecast of 5.4%. This data indicates that consumers are paying more as the commodities and services have become expensive. Consequently, investors are expecting more interest rate hikes from the Bank of England.
The BOE may announce a 25-basis point hike in the May month policy meeting. From a technical perspective, GBP/USD is experiencing some selling pressure on the hourly chart due to a renewed demand for the dollar. The sellers have pushed the price below the 200-hour moving average at the 1.307 mark. Yesterday, the GBP/USD pair consolidated the gains from the Wednesday session and fell by 0.29% in route.
The market participants may take a cautious approach for the time being as better than expected retail sales data from the United States may induce some bearishness in GBP. The bears may take control of the price if any uncertainty regarding the Russia Ukraine war emerges. The United States and its western allies including Germany and UK may impose sanctions against the Russian oil and gas. If that happens, the GBP/USD may tumble towards the 1.3000 mark.
The 1.3117 level is acting as stiff resistance for GBP/USD from last month. The bulls have initiated multiple attempts in the last few trading sessions but failed to break this level. According to financial analysts, the positive fundamentals including comparatively stronger economic data reports and a hawkish stance from the Bank of England may bolster the British pound in the near term.