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GBP/USD: Buyers struggling to keep the wheels upright ahead of major EU summit, UK CPI

  • The GBP heads into a high-impact Wednesday with inflation data for both the EU and the UK on the docket.
  • Today's EU leadership summit in Brussels promises plenty of Brexit-centric comments, as the current line of rhetoric sees Brexit talks both close and not-close to achieving a deal at the same time.
The GBP/USD is trading towards the downside in early Wednesday action, testing into 1.3170 ahead of the London market session.

Sterling traders are being sent adrift by an endless barrage of Brexit headlines and comments from EU and UK leaders, with little evidence that any forward progress is being made. UK wages data reported in yesterday's session helped to bolster the GBP somewhat, but the overall mood in markets remains taut in the run-up to Wednesday's EU leadership summit, where Brexit will be the top billing for the day.

Alongside the headline-driving EU summit that kicks off today, Britain sees another round of top-tier economic data, with September's CPI in the barrel for 08:30 GMT. The core annualized figure is forecast to dip slightly to 1.8% (previous 2.1%), while y/y CPI for September is expected to tick upwards from 2.7% to 2.8%. With Europe also dropping their own CPI data around the same time, markets are geared up for a highly volatile mid-week window, with critical inflation figures and expected grandstanding from the leadership summit all crashing together through the day.

GBP/USD levels to watch

As noted by FXStreet's Valeria Bednarik, tightly-stretched hopes for a successful Brexit deal are keeping Cable bulls at bay, with some bullish potential still built into the charts, but downside pressure continues to remain a contender for the GBP/USD's direction: "uncertainty surrounding a Brexit deal maintains bulls on-hold, although it's clear that the market believes a deal will be achieved. In the 4 hours chart, the pair is trading above its 20 SMA, which stands a couple of pips above the mentioned Fibonacci level, reinforcing the relevance of the static support. The Momentum indicator in the mentioned chart heads higher around its mid-line, while the RSI indicator eases from its highs and stands at 53, limiting the upward potential for the pair. A break through the mentioned 1.3257 level could result in a steeper advance, although it's all about Brexit and how the market perceives chances of a deal."

Support levels: 1.3170 1.3130 1.3095
Resistance levels: 1.3210 1.3260 1.3300