A beautiful amount of volatility entered the market after the release of the US inflation data a few hours ago. Some large wicks presented in the GBP/USD which eventually tested and rejected at 1.2121 to the downside. Although, the more interesting wicks occurred exactly at the time of the release, with the market feeling out a high of 1.2270 and a low of 1.2150.
US annual inflation rate slowed only slightly to 6.4% in January of 2023 from 6.5% in December of 2022, less than market expectations of a fall to 6.2%.
The pair has now calmed down and appears to be stuck under 1.2189 (a swing target level suggested yesterday). Investors are now waiting for the UK inflation data that is due in under 12 hours (8pm NZDT). If UK inflation dissapoint like the US did, we might see the GBP break above this short-term resistance level and recover to at least where it was yesterday (1.2210). It all depends on the size of the disappointment.
UK inflation is expected to fall from 10.5% to 10.2% by the wider market. But a larger decline might be expected by the Bank of England, who are optimistically predicting that inflation will hit 4% by the end of the year.