The British Pound (GBP) has risen above 1.3300 against the US Dollar during North American trading hours. This increase is attributed to a decline in the value of the US Dollar after the release of a weaker-than-expected Producer Price Index (PPI) report for April. The data showed that the PPI rose by 2.4% on a yearly basis, lower than the estimated 2.5% and the previous reading of 2.7%. The core PPI, which excludes volatile items, also grew at a slower pace of 3.1% compared to the previous month’s reading of 4%. Surprisingly, the monthly headline and core PPI both showed a decrease of 0.5% and 0.4% respectively.
This slowdown in the prices of goods and services at the factory level may provide some relief for Federal Reserve (Fed) officials. However, their main concern is the high inflation expectations of households. Additionally, the Consumer Price Index (CPI) for the US also decreased in April.
In a recent event, Fed Vice Chair Philip Jefferson stated that the current policy is moderately restrictive and well-positioned in light of uncertainty surrounding new economic policies implemented by US President Donald Trump. He also welcomed the recent decline in CPI but warned about the potential impact of ongoing tariffs.
The CME FedWatch tool suggests that the Fed is not likely to decrease interest rates until their September policy meeting, and is expected to cut rates twice this year.
In other news, the US Retail Sales, an important measure of consumer spending, showed minimal growth in April, with a 0.1% increase compared to the expected flat result.
As of Thursday, the GBP has risen to near 1.3300 against the USD and is currently trading above the 20-day Exponential Moving Average (EMA) of 1.3256, indicating a bullish trend in the near future.
The 14-day Relative Strength Index (RSI) is currently between 40.00-60.00, and a break above 60.00 would signal a bullish market.
If the upward trend continues, the key resistance level will be 1.3445. On the other hand, 1.3000 is expected to act as strong support.