Daily Analysis GBPUSD - 16 Aug 2023

In July, UK headline inflation experienced a significant decline to an annual rate of 6.8%. However, the core consumer price index remained steady, which could pose challenges for the Bank of England. This aligns with economist predictions gathered by Reuters, and it follows the cooler-than-anticipated figure of 7.9% in June. On a monthly basis, the headline CPI decreased by 0.4%, aligning closely with the consensus forecast of -0.5%.

Conversely, core inflation, which excludes volatile energy, food, alcohol, and tobacco prices, remained at 6.9%, unchanged from June, and slightly above the anticipated 6.8% consensus forecast.

The ILO Unemployment Rate in the UK increased to 4.2% over the three months leading up to June, as reported by the Office for National Statistics (ONS) on Tuesday. This reading was worse than the market's expectation of 4%, following the 4% reported in May. Other aspects of the report indicated that wage inflation, as indicated by the change in the Average Earnings Excluding Bonus, reached 7.8% in June, compared to 7.5% in May. Average Earnings Including Bonuses surged by 8.2%, surpassing analysts' estimate of 7.3%.

These robust wage inflation figures led to a rise in UK gilt yields, reflecting the influence of hawkish Bank of England (BoE) predictions. At the current time, the 2-year UK gilt yield has risen to around 5.14% for the day.

The GBP/USD found support at 1.2650 and formed a double bottom while the next resistance level is at 1.2820 and the support will be at 1.2650 again.

Resistance 3	Resistance 2	Resistance 1	Support 1	Support 2	Support 3
1.3220	1.3150	1.3000	1.2650	1.2600	1.2400