GBP – Sterling Under Resistance at Trendline, Focus on UK Inflation Data Today

The pound fell for the fourth consecutive day against the dollar, hitting 1.3359 on Tuesday. The market is awaiting the release of UK June inflation data today, which could be a key variable in the pound's short-term direction. The UK Office for National Statistics will release its June CPI data on Wednesday, which is highly anticipated. This is the first major economic data release since Prime Minister Bernard officially took office as Prime Minister on Monday and formed his new cabinet. Most economists expect the overall inflation rate in June to fall to 2.7% from 2.8% in May. A significant drop in petrol and diesel prices is the main driving factor.

New Prime Minister Bernard announced on Tuesday that household electricity bills will be exempt from VAT from October 1st, saving ordinary households approximately £45 annually. This is part of the new Prime Minister's promise to alleviate cost-of-living pressures. The government estimates that reducing VAT from 5% to 0% will lower the CPI by approximately 0.1 percentage points after it takes effect.

The British pound was capped by a descending trendline resistance last week, subsequently experiencing a significant pullback. Currently, attention will be focused on the 25-day moving average at 1.3320. A further break below this level would intensify downward pressure on the pound; in particular, the chart shows the RSI continuing its downward trend, and the 5-day moving average crossing below the 10-day moving average, both indicating a short-term bearish bias for the pound. Stronger support levels are expected at 1.3210 and 1.3140, with the key level at 1.30. Resistance is seen at 1.34 and 1.3480, with the descending trendline remaining a key level to watch. Resistance is currently at 1.3540; a break above this level would allow the pound to begin another upward move, potentially reaching the May high of 1.3657.

Forecasted Range:
Resistance 1.3400 – 1.3480 – 1.3540* - 1.3657
Support 1.3320* - 1.3210 – 1.3140 – 1.3000*

This Week's News Highlights:
July 20: Bernard officially sworn in as UK Prime Minister
July 21: UK Wages (excluding bonuses) YoY (to May) +3.4%
UK ILO Unemployment Rate (to May) 4.9%
UK Average Wages (including bonuses) YoY (to May) +4.3%
UK May Employment Change +147,000
UK June Unemployment Claims Change +6,700
UK June Unemployment Claims Ratio 4.4%
UK June Public Sector Net Borrowing £15.989 billion

Focus:
Wednesday: UK June CPI, PPI, RPI (14:00)

Friday
UK GFK July Consumer Confidence Index (07:01)
UK June Retail Sales (14:00)
UK July PMI (16:30)

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