British pound holds modest gains after inflation data

The British pound rebounded from early Asian session losses following UK CPI data that aligned with market expectations. As of now, GBPUSD trades above 1.3400, having reached a fresh four-week high of 1.3475 on Monday before a slight pullback.

UK Inflation Overview

Official data from the Office for National Statistics shows UK inflation steady at 3% in February, above the Bank of England’s 2% target, with no monthly change. The annual core inflation rate rose slightly to 3.2% from 3.1% in January, matching market forecasts. However, inflation may increase in the coming months due to rising energy costs linked to the Iranian conflict.

British Pound Outlook

The British pound has remained strong against various currencies, including the dollar, the yen, and commodity-linked currencies. The GBP has risen as investors anticipate that the Bank of England will continue to tighten its policy to reduce inflation, given that consumer price growth may take years to return to the target rate of 2%. Attention now turns to Friday’s UK retail sales data and upcoming comments from Bank of England and Federal Reserve officials.

GBPUSD Technical Analysis

Technically, although the short-term trend is positive, the detailed analysis indicates that bulls are finding it difficult to sustain the upward momentum. For a significant bullish advance, the currency pair must break and hold above the 1.3500 level on a weekly basis. The 1.3500–1.3530 zone remains the key resistance area to watch in the near term. As long as prices remain below this range, the mixed trend is likely to continue, even with potential short covering and some bullish activity at lower levels.

On the downside, the nearest support level is located at 1.3350/40 (20-Day SMA). In case it breaks below this level, it will head towards the next support level, which is located near 1.3300/1.3280, which is the key support area for this week. This zone is expected to attract significant market interest, warranting close observation.

Disclaimer! This material is not intended as investment advice. Past performance data does not guarantee future profits. Investing in foreign currencies may affect your returns due to their fluctuations. Any securities transaction may result in both profits and losses. The assumptions and expectations set forth in the material are only estimates that may not be accurate and may change according to current economic conditions. These statements do not guarantee future performance.