Sterling Gives Back Gains Following Inflation Reports

The GBP/USD moved back toward unchanged giving back most of the rally it experienced following the UK inflation data. The inflation data revealed the expected declines in the headline CPI rate to a flat reading in August from July’s 0.1% , and to 1.0% year over year in the core CPI measure, down from 1.2% in July. PPI data undershot expectations slightly. Cable has settled back to net unchanged levels for the day, around 1.5420, down from the earlier high at 1.5457. The pound is trading fractionally firmer against the euro, though EUR/GBP at 0.7330 is up from the earlier low at 0.7312.

Support on the currency pair is seen near the 200-day moving average at 1.5343, while short term resistance is seen near the 20-day moving average at 1.5447. Momentum on the currency pair has turned positive as the MACD (moving average convergence divergence) index generated a buy signal. This occurs as the spread (the 12-day moving average minus the 26-day moving average) crosses above the 9-day moving average of the spread. The index moved from negative to positive territory confirming the buy signal.

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