Inflation in the United States should have decreased from 5.0% to 4.9%. Thus, it would have shown that the increase in inflation is actually temporary and the situation will soon stabilize, which means that nothing threatens the pace of economic recovery. This was exactly what was supposed to lead to the growth of the dollar, which eventually happened. But inflation in the United States has not slowed down, but accelerated. And immediately went up to 5.4%. The last time inflation climbed so high was only in August 2008. In July 2008, inflation was at 5.6%, and over the past thirty years, this is an absolute record. Inflation was higher only at the very end of 1990. In theory, the growth of inflation should have led to a weakening of the dollar's position, since this clearly threatens the recovery of the American economy.
However, the inflation data turned out to be a complete shock. No one could have imagined such a sharp increase in inflation. And since this is happening in a country that has the largest consumer market in the world, other countries will not be able to stay away. The whole world is already suffering because of rising inflation, but apparently, this process is still far from being completed. It is quite possible that the situation will be even worse in other countries. The dollar rising regardless of the result of the inflation data could have been an amazing scenario. Perhaps, if inflation had remained unchanged, or accelerated not so much, then the dollar could probably have weakened somewhat. But we just have to accept how it turned out.
Inflation (United States):
After such a sharp rise in the dollar, it is obvious that at least a local rebound is inevitable. In fact, we are already observing it. At the same time, the market ignored the data on inflation in the UK, although the growth rate of consumer prices accelerated from 2.1% to 2.5%. And this is despite the fact that they expected an increase in inflation to 2.3%. The situation here is somewhat different than in the case of the United States. The United Kingdom is not as large-scale an economy as the American one, and the increase in inflation in the British Isles will not have such an impact on the entire world economy. So, the increase in inflation in the UK is a negative factor exclusively for the pound.
Another reason for the rebound will be provided by the American statistics itself, since the growth rate of producer prices may accelerate from 6.6% to 6.8%. This means that inflation in the United States will continue to grow. Formally, it was the growth of inflation that became the reason for the growth of the dollar, so it is quite strange that it loses its positions for the same reason. But here, the point is largely that yesterday's data was in many ways a complete surprise. Moreover, the dollar eventually turned out to be seriously overbought. So, the data on producer prices will be interpreted somewhat differently than the data on inflation, unless the producer price index shows the same sudden and strong growth.
Producer Price Index (United States):
The GBP/USD currency pair completed a corrective move near the resistance level of 1.3900, where there was a reduction in the volume of long positions and as a result, a recovery of about 70%.
The market dynamics after a short stagnation again shows signs of acceleration, which is confirmed by the growth of speculative operations.
A rollback is visible in the current location of the quote, which is due to the local oversold status.
It can be assumed that the rollback is temporary, where it is possible that it will end around the 1.3850 mark, and a downward move will come in its place. It is worth noting that the support role is played by the price area of 1.3730/1.3750, relative to which a corrective move has arisen.
From the point of view of complex indicator analysis, it is clear that technical instruments signal a purchase at the minute interval due to the pullback stage. The hourly and daily interval signals a sale, due to a rapid downward movement.