Inflation slipped back to zero in August, narrowly avoiding a return to deflation as some economists had feared. The Office for National Statistics (ONS) said the Consumer Price Index (CPI), which measures the average cost of a basket of goods – stood at 0.0% in August, down from July’s 0.1%. Forecasts had suggested that Britain would see deflation for the second time this year after the biggest fall in oil prices since the start of the year.
Last week the announcement from the US Federal Reserve (Fed) that it will be maintaining its benchmark interest rate at its current record low was not entirely unexpected. However, the voting pattern of the policy makers did surprise investors, as did the tone of Fed Chair Janet Yellen’s press conference which followed.
The central bank has two more scheduled policy meetings this year, in late October and mid-December. Most analysts now expect a rate rise to come in December at the earliest.
Since the start of the year the currency rose more than 1.5% and changed phase last week from warning to a bullish phase. Last week the GBPUSD went back and forward without any clear direction with a narrow range but managed to close in the green near the open of the week. Stochastic is showing a slight bullish momentum although it is below the 50 mid line.
Expecting an upward move to a key level at 1.5930 on a break above previous week high at 1.5658 (scenario 1) or a break below a weekly resistance at 1.5483 could push the currency down to a key level at 1.5163 (scenario 2).