FX.co ★ UFCworriers | GBP/USD

Pound Sterling (GBP) is showing strength compared to the US Dollar (USD) on Thursday, as the currency pair trades solidly close to the monthly highs of around 1.3410 during European trading hours. The GBP/USD pair rallies after a hot UK Consumer Price Index (CPI) print for September fuels hawkish Bank of England (BoE) forecasts. According to analysts from Nomura, the latest UK inflation print reveals increased upward pressure, as “both headline and services inflation in the September print have exceeded consensus expectations.” The analysts emphasize that the BoE’s core indicator of underlying inflation pressures has proven to be sticky, as “the BoE’s core measure of service prices momentum has been sticky in recent months.” Furthermore, Nomura mentions that there has been upward pressure through the pipeline, noting that “upstream prices have also been a surprise to the upside.” Though they believe that the rise in wholesale prices was driven mostly by the increase in energy prices, they also add that “core prices have risen at a more modest pace.” On the other hand, Nomura warns that “upstream service prices are signaling an increase in consumer prices.” In this light, Nomura states that “sticky inflation, a resilient labor market, robust economic growth, and sustained elevated energy prices have made us change our views on the BoE.” They now foresee a tightening cycle, stating that “we now forecast rate hikes in November and February, although this is still a more dovish outcome than markets are pricing in.” From here, investors will be keeping an eye on the upcoming UK Retail Sales for September and preliminary UK-US S&P Global PMI for October prints, scheduled for Friday. GBP/USD is trading at 1.3404 on the daily chart. The currency pair has once again managed to take up a bullish bias since it remains above the 20-day EMA at 1.3313 and trades between the 38.2% and 50.0% Fibonacci retracement of its recent bearish run, where the latter comes in overhead at 1.3409. RSI at 58.6 is getting into positive territory that hints at recovering upside momentum amid the test of this important resistance. The nearest overhead resistance will be at the 50.0% Fibonacci retracement at 1.3409; before that, it will be the 61.8% retracement at 1.3472 and 78.6% at 1.3562, with the recent swing high at 1.3677 forming an important resistance on its way up. As far as the downside is concerned, the nearest support will come at the 38.2% Fibonacci retracement at 1.3345; after that, there is the 23.6% retracement at 1.3267, while a deeper correction will find its way towards the 1.3140 level.