Higher than expected yearly UK CPI data is likely to increase the differential between UK and US rates. This has been quickly discounted by the market where GBP/USD is advancing by 0.37% to 1.3207.
The UK CPI YoY rose by 3.6% against a previous 3.3%. From a technical perspective, the pair is making lower highs from the 2024 top, which could suggest a profit taking retracement or the opening of a inversion of trend.
The dynamic resistance which links lower highs would be a main indication at the moment to assess the possible trend denomination in the short term.
In the medium to long term, GBP/USD remain positive since is trading above the most relevant moving averages: 21, 55 and 200 day SMA.
The bullish trendline linking higher lows is 350 pips below current market prices.
It would be time before the US dollar regain the status of carry trade currency considering its current rate level but markets move in anticipation of future events, thus if there is the perception of a dovish FED while the BoE would continue to monitor price stability with more determination carry trades on floating debts and assets on Swaps could be implemented opening opportunities for exposure on both prices and swaps changes.
FX spot rates are just the tip of the iceberg in the gigantic world of currency trading. To obtain more information on market sentiment would be also useful to monitor the increase exposure on GBP/USD of other instruments like options , swaps and futures.
