Sterling eyes $1.54
Inflation in the UK dropped to 0.3% in January, and even though the figure is the lowest number on record GBP/USD actually jumped higher on the back of the news. The reading in December was 0.5% and the market was expecting a reading of 0.4%, but traders know the weak number is largely down to low oil prices rather than poor demand in the British economy.
Mark Carney previously warned about the possibility of deflation hitting the UK, but until the CPI swings to negative territory the market won’t take his comments about an interest rate cut seriously.
GBP/USD is encountering resistance at $1.54 and if this level is held the immediate target will be the 100-hour moving average of $1.5345; a move through this level would bring $1.53 into sight. If $1.54 is cleared to the upside, then the 100-day moving average at $1.5515 will be the target.