The pound began to grow actively from the very opening of the European trading session, which is somewhat strange. Of course, the correction was obvious after such a rapid fall. But the fact that it started so quickly and confidently is somewhat surprising. Moreover, inflation in the UK accelerated from 2.1% to 2.5%, even though it was expected to grow only to 2.3%. Moreover, the increase in inflation is in many respects rather a negative factor, especially in the current conditions. However, the main threat posed by an increase in inflation is a slowdown in the pace of economic recovery. But the fact is that an increase in inflation only increases these risks, by no means guaranteeing that this is exactly what will happen. Moreover, it is precisely the increase in inflation in the United States that has led to the strengthening of the dollar. After all, the increase in inflation was already anticipated. It just turned out to be a little bigger than predicted. So basically, the data did not differ from what they wanted to see. And of course, do not forget about the obvious oversold value of the pound, which was formed the day before.
Inflation (UK):
During the American session, the pound continued to grow, which was supported by data on producer prices in the United States. Their growth rate accelerated from 6.6% to 7.3%, which was significantly higher than the expected 6.8%. This means that inflation in the United States will continue to grow. Of course, the sudden increase in inflation was a complete surprise for market participants, which provoked a slight panic. This time, everything is much simpler and clearer - inflation will clearly grow. And this is frightening, as it threatens the recovery of the American economy. But even if there were no such data, the dollar would still lose its positions, just because of its overbought condition.
Producer Price Index (United States):
However, it seems that the correction was somewhat overdone, and the pound eventually returned to almost the same values at which it was before the publication of inflation data in the United States. As a result, it already began to actively decline during the Asian session. And it almost returned to the same values at which it was just before the start of yesterday's correction. That is, the pound shows incredible volatility. As a result, just before the publication of data on the labor market, it began to grow a little. Moreover, the forecasts were relatively good. But the data did not come out exactly as expected. The unemployment rate, which was supposed to remain unchanged, rose from 4.7% to 4.8%. So, the growth of the pound instantly stopped, and even attempts to reduce began to manifest themselves. Another thing is that the constant throwing from side to side has already disoriented market participants, and no one understands where the equilibrium point is. Accordingly, it is not at all clear whether the pound needs to decline now, or whether the correction has not yet been completed and now it needs to grow. Most likely, the main result of the publication of data on the labor market will be the normalization of the situation, and consolidation in the area of current values.
Unemployment rate (UK):
Today, the dollar is likely to resume its growth, which will be facilitated by relatively good macroeconomic data. Thus, the number of initial applications for unemployment benefits may be reduced by 5 thousand, and repeated applications by another 39 thousand. In addition, industrial production should increase by 0.6%. However, this is in monthly terms, since the annual data are still distorted by the effect of a low base, and the growth rate should slow down from 16.3% to 12.2%. The values are quite impressive, and it is too early to draw any conclusions based on them. In any case, the forecasts for statistical data are rather optimistic in general, which will contribute to the strengthening of the dollar.
Industrial Production (United States):
The GBP/USD currency pair during the last trading day demonstrated a high swing in the market, during which speculators managed to develop an amplitude of 90 points. In fact, we could locally see an almost complete recovery of the price of the British currency relative to the downward course in the period of July 13.
The market dynamics is still on the wave of acceleration, which is confirmed by both the structure of trading candles and the coefficient of speculative operations.
In the current location of the quote, a new round of fluctuations is visible, which is revealed in the structure of the previous stage of the price impulse.
It can be assumed that the chaotic price fluctuation will continue in the market, but this time the amplitude may have a limited range, which will eventually lead to the effect of a compressed spring. In simple words, we are interested in the price fluctuation within the 1.3820/1.3890 stage, where a compression process with subsequent acceleration is possible and we try one or another stage boundary.
From the point of view of complex indicator analysis, it can be seen that technical instruments signal a purchase at a minute interval. The hourly and daily intervals signal a sale.
