Latest British Pound (GBP) – BoE Policy Factor Warns on Inflation, GBP/USD Analysis

British Pound (GBP) Latest Analysis – GBP/USD

• BoE hawk Catherine Mann is concerned about rising wages.
• Sterling’s recent resurgence continues, 200-dsma provides support.

Bank of England MPC policy member Catherine Mann, one of four rate-setters who voted to leave interest rates unchanged at the central bank’s last meeting, warned this weekend that inflation could rise again in the coming months. Talking to Financial TimesMs. Mann said recent surveys suggest that, “There is an upward click in both the wage-setting process and the pricing process and . . . it may be structural, having been created during this period of very high inflation in the last two years,” she added. “This ratchet will take a long time to erode.”

Ms Mann’s warning comes ahead of a busy economic release schedule, with the latest data on UK employment, wages, inflation and GDP all due in the coming days.

For all the economic data and events that move the market, see DailyFX Economic Calendar

GBP/USD hit a multi-week low of 1.2665 last week on the back of sterling weakness and US dollar strength. The pair has since rallied, helped by a 200-day simple moving average, and is currently trading around 1.2770. Cable is trying to break out of a sharp one-month downtrend after posting a 13-month high of 1.3045 on July 17, and this week’s economic data will decide the pair’s future. Support remains around 1.2665, supported by the 200-dsma at 1.2661, while near-term resistance is around 1.2863.

GBP/USD Daily Price Chart

Retail trader data shows that 51.94% of traders are net-long, with the ratio of long-short traders at 1.08 to 1. The number of net-long traders is 0.92% higher than yesterday and 13, 53% higher than last week, while Traders net-short number is 0.44% higher than yesterday and 4.78% lower than last week.

We typically take a contrary view to crowd sentiment, and the fact that traders are net-long suggests that GBP/USD prices could continue to decline. Traders are more than yesterday and last week and the combination of current sentiment and recent changes gives us a stronger bearish reversal trend in GBP/USD.