GBP/USD heads towards 1.30 after US CPI inflation runs hot

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

GPB/USD rallied on Thursday, struggling just north of the 1.3000 handle before easing 0.1% for the day. The greenback was supported by a US consumer price inflation (CPI) reading that came in higher than markets expected. A string of UK and US dates follow on Friday, giving cable a tense end to an otherwise quiet week.

U.S. headline CPI inflation fell less than expected in the year ended September, falling from 2.5 percent to 2.4 percent. Median market forecasts called for a print of 2.4% per year. On the other hand, core U.S. CPI inflation rose more than a year ago in September, rising to 3.3% from 3.2% previously.

U.S. initial jobless claims rose unexpectedly in the week ended Oct. 4, climbing to 258,000 week-on-week and cutting the largest rate of new jobless claims since June 2023.

Mixed rate impact data unsettled bond markets on Thursday. Rising unemployment figures bolster hopes for interest rate cuts as the Federal Reserve (Fed) seeks to keep the US labor market afloat, while still-hot inflation makes it difficult for investors to expect a faster pace and the deepening of rate reductions.

Friday offers a packed data folder for cable traders. UK Gross Domestic Product (GDP) figures for August are set to kick off, expected to increase to 0.2% month-on-month in August from 0.0% the previous month. UK manufacturing and industrial production are expected to rebound in August. Manufacturing output is expected to rebound to 0.2% month-on-month from a previous contraction of -1.0%, while industrial production is forecast to return to 0.2% month-on-month from a previous -0.8% .

US producer price index (PPI) inflation will continue during the US market session. September’s core PPI print for the year ended September is expected to accelerate to 2.7% from last month’s 2.4%.

GBP/USD Price Forecast

GBP/USD is currently trading at 1.3056, showing a minor decrease of 0.11% for the day. The price action suggests a bearish trend that has emerged 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 fresh downward momentum. The 200-day EMA at 1.2840 acts as a crucial support area that could be tested if selling pressure continues to build. Bearish candlestick patterns in recent sessions support the view that sellers are in control.

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

In a broader context, GBP/USD 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 strengthening the bearish signal and 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 key role in determining the pair’s next move.

GBP/USD Daily Chart