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As pound has reached our upside target area around 1.527 and failed to provide any signs of further upside momentum, we expect it might revisit recent low made around 1.505 area before further move in any direction.
Moreover, today's inflation data though haven't worsened, it shows that price pressure remain subdued. Consumer price index (CPI) grew only by 0.1% in October, down -0.1% from a year ago, Retail price index (RPI) failed to grow and Producer price index (PPI) dropped by -1.3% last month. Only house price index (HPI) is up 6.1% from a year ago, which is a bad news at a time when wage growth is subdued.
Pound, though moving higher after the release of inflation statistics is likely to drop against Dollar, due to expansion of divergence in rate hike.
Inflation is too weak to bet in favor of early rate hike. It is likely to be very late.
Trade idea
- Sell Pound against Dollar at current price (1.52), with target around 1.505 area and stop loss around 1.528. It is a good 2:1 risk reward ratio.
