Barclays – GBP/USD: Remains firm ahead of US CPI but unlikely to hold above 1.2000

Barclays discuss GBP outlook and maintain near-term downtrend forecast.

“The pound, like most of the other G10 currencies, remains relatively stable in anticipation of the data and as a result of the lack of news to drive volatility – a market feature that may persist until we get the key data on inflation from the US tomorrow.Separate reports have highlighted the potential for strains ahead for consumers who are being squeezed by rising prices for essential goods and services.Research by property site Zoopla revealed rents rose by nearly 20% in central London in Q1 2022 y and 10% in London’s fringes, growth in Q1 2019 was 2%. This is fueling significant rental increases, also underpinned by a marked drop in supply,” Barclays traders noted.

“So the outlook for consumer spending remains bleak with the potential for much greater strike action in the public sector than on the continent. Nurses’ union RCN – is recommending strike action by its 465,000 members in what would be the first strike by nurses in UK GBP/USD will not be able to hold above 1.2000 as downside risks persist,” Barclays added.

Barclays expects the decline in the current quarter to consolidate around 1.17 before a long-term cross bottom is formed.

Average estimates of all bank traders however suggest that we may not see a lower bottom in GBPUSD and after a period of summer range a bullish move is likely to form on the cross.

Technically, the pair retraces the breakout, on the descending channel, forming a Head & Shoulders reversal as well. Lower readings for US inflation could lead to a breakout of the neck and trigger a run on the figure. CPI higher than 8.7% will return quotes back to the descending channel and a move towards 1.17