GBP/USD: do not expect a steeper recovery ahead of BoE - FXStreet

Valeria Bednarik, chief analyst at FXStreet explained that the GBP/USD pair plunged to a fresh 2-week low of 1.3166, as Pound bulls reacted negatively to weaker-than-expected UK inflation figures. 

Key Quotes:

"The August CPI came in at 0.6% year-on-year, matching July's figure, and slightly below the 0.7% expected.

The monthly reading  resulted at 0.3%, above previous -0.1%,  but also missing expectations, in this case of 0.4%. The price of goods bought and sold by UK manufacturers, according to the Producer Price Index, rose in the year to August 2016, with factory gates prices up 0.8%, up from previous 0.3%, yet below a forecast of 1.1%. The decline accelerated once the pair broke below 1.3300, forcing investors into profit-taking ahead of BOE's economic policy announcement next Thursday.

This Wednesday, the UK will release its monthly employment report, with the focus on wages, expected modestly lower from previous month readings. In the meantime, the pair is struggling to firm up above the 1.3200 level, hovering around the level by the end of the day.

Short term, the risk remains towards the downside as in the 1 hour chart, technical indicators have resumed their declines within oversold territory, whilst the 20 SMA maintains a strong bearish slope far above the current level. In the 4 hours chart, the price has broken below its 200 EMA, currently around 1.3235, while technical indicators have bounced modestly from oversold readings, but are far from supporting a steeper recovery."