The published United States (US) annual inflation data jumped to 8.6% for May 2022, the highest annual inflation reading ever recorded since December 1981.
Previously, annual inflation data for March recorded 8.5% and recorded a 40 -year high before declining again to 8.3% in April readings which has made investors feel inflation has peaked and will start to decline after the central bank tightens policy.
The surge has melted investors ’expectations for inflation in the US to continue to decline as readings published last May.
With this surprising increase has made investors increasingly confident that the Federal Reserve (Fed) will continue to raise interest rates 50 basis points until September to combat rising inflation in the US.
Thus, the strengthening of the US dollar which is expected to continue this week ahead of the FOMC meeting has put pressure on most other major currencies in the market including the Pound.
The UK jobs data report to be published on Tuesday will also be the focus of investors before the focus shifts to the outcome of the England central bank (BOE) policy meeting on Thursday that will affect the Pound’s trading this week.
The price movement on the GBP/USD currency pair chart in the European session last Friday has seen the price make a significant decline all the way to the New York session by recording a daily decline of around 200 pips.
The decline from the 1.25000 zone has broken the focus zone at 1.24000 and continued the lower decline reaching the 1.23000 level at the end of the last session of the week.
The price plunge was driven by the release of US inflation data in the New York session which showed a clearer bearish movement on the GBP/USD chart.
The price is still showing a bearish movement where the price is still moving below the level of the Moving Average 50 (MA50) barrier in the 1 hour time frame to continue this week's trading.
If the Pound continues to decline under pressure from the strengthening US dollar, the price will make a lower decline and test the zone around 1.21600 to hit the latest 5 -week low.
The further decline in the price is seen to test the focus zone at 1.21000.
On the other hand, if the price increase manages to happen again, the price will make an increase from the 1.22800 zone and then move to the 1.24000 zone to test the resistance zone.
The price increase that still managed to continue breaking the resistance zone will then target for a higher rise in the next focus zone at 1.25000.
