Sterling/dollar (GBP/USD) made a new 6-month low just before a plethora of reports covering the cost of goods for consumers and manufactures. Both PPI (producers) and RPI (retail) inflation reads came in higher than expected, but CPI, a measure of inflation as a whole came in as expected at 2.7%. The key catalyst for a firm CPI was that alcohol and air fares remain elevated.
The UK Conference Board Leading Economic investment did climb 0.1% in December, but the gains are too slow to trigger stronger optimism. Friday, retail sales will be released and if we do not see the expected positive print of 0.5%, we could see a further collapse in the pound. Last week, manufacturing and industrial production improved, but that could be overlooked if we see a return of negative data prints in the Britain.
CHART ANALYSIS
Price action on the daily chart is highlighting a strong breakdown of key long-term support. If the downtrend resumes, we could see price target the 1.5500 handle, followed by the 1.5250 area. In order for the bearish corrective move to be invalidated, we will need to see price recapture the 1.5750 – 1.5800 area.
