GBP/USD turns negative from four-week highs as Dollar erases US CPI losses
12.01.2023, 15:06

GBP/USD turns negative from four-week highs as Dollar erases US CPI losses

  • US Dollar tumbles after CPI data, trims losses after Wall Street opening bell.
  • Inflation confirms slowdown in the US, Fed’s Harker expects 25 bps hikes now.
  • GBP/USD reveres sharply, drops below 1.2100.

On a volatile session for FX, the US Dollar has reversed sharply during the last hour and turned positive across the board. The GBP/USD peaked after the release of US inflation data at 1.2244, the highest level in four weeks and as of writing, it is trading below 1.2100, at the lowest since Monday.

Dollar tumbles then soars

Inflation data triggered a decline of the US Dollar that then recovered as equity prices in Wall Street dropped following the opening bell. The US Consumer Price Index fell in December 0.1% and the annual rate slowed to 6.5% from 7.1%, reaching the lowest level since October 2021.

Following the inflation numbers, Patrick Harker, President of the Federal Reserve Bank of Philadelphia, said it was time for future Fed rate hikes to shift to 25 basis points increments. His comments added fuel to the decline of the greenback as US yields sank.

Equity prices in Wall Street turned negative after the opening. The deterioration in market sentiment was accompanied by a rebound in US yields. The US Dollar reversed its course and rose sharply, erasing all US CPI-losses.

The GBP/USD is struggling to hold above 1.2100 as markets continue to digest CPI numbers and the Dollar keeps looking for a direction. The Pound also weakened during the last hour versus the Euro, with EUR/GBP surging to 0.8890, the highest level since late September. 

Technical levels

 

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