• The US CPI increased by 0.3% in September, beating forecasts of a 0.2% increase.

• Market participants are pricing a 91% chance of a 25-bps November Fed rate cut.

• US producer prices were unchanged in September, compared to expectations of a 0.1% increase.

The GBP/USD forecast shows indecision as market participants absorb recent US inflation figures. The dollar remained steady after rate cut bets fluctuated last week with mixed US economic figures.

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After a sharp decline, the pound remained in a tight consolidation as traders adjusted to a drop in Fed rate cut expectations. Last week, data from the US showed a jump in consumer inflation. The CPI increased by 0.3% in September, beating forecasts of a 0.2% increase. The unexpected increase followed a blockbuster monthly jobs report, which wiped out expectations for another 50-bps rate cut in November. Consequently, the dollar has rallied as markets reprice the Fed’s policy outlook.

Currently, market participants are pricing a 91% chance of a 25-bps rate cut plus a small likelihood of a pause. Initially, bets had dropped to 80% before climbing after a downbeat wholesale inflation report.

Producer prices were unchanged in September, compared to expectations of a 0.1% increase. This was in line with the view that inflation would soon reach the Fed’s target. Therefore, the central bank will likely cut in November. Nevertheless, as more data comes in, this likelihood will keep changing.

Meanwhile, the UK economy expanded by 0.2% in August after stagnation. However, since the figure met forecasts, the pound barely rose. This week, markets will focus on retail sales data from the US and the UK, which will show the state of consumer spending. This will likely influence the outlook of monetary policy in both countries.

GBP/USD key events today

The pair might keep consolidating since no key reports are coming from the US or the UK.

GBP/USD technical forecast: Price shows indecision near 1.3051

On the technical side, the GBP/USD price trades between the 30-SMA resistance line and the 1.3051 support level. Meanwhile, the RSI trades below 50, suggesting solid bearish momentum. However, despite the clear bearish bias, the RSI has made a bullish divergence, showing the downtrend has weakened.

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Therefore, if bears emerge, they might take control with a break above the SMA. On the other hand, if bears regain momentum, the downtrend will continue with a new low below 1.3051.

https://www.forexcrunch.com/blog/2024/10/14/gbp-usd-forecast-us-inflation-data-triggers-indecision/