Despite the strong resistance at the 1.6400 handle, GBP/USD refused to back down last Friday as it ended 48 pips above its day open price of 1.6315. Meanwhile, GBP/JPY stopped in its tracks at 140.00 before closing at 138.84.
The pound was able to score another day of wins against its major counterparts after the U.K. printed better than expected producer price reports. The PPI input showed that the prices of goods and raw materials purchased by manufacturers jumped by 3.7% last month while the PPI output figure printed a 0.7% increase. On top of that, the PPI input reading for February was revised upwards to show a 1.4% rise.
As we all know, if producer prices keep climbing, manufacturers will eventually have to sell their products at higher prices. This means that the costs will be passed on to consumers and this will lead to higher consumer inflation. The ECB responded to stronger inflationary pressures by hiking interest rates last week. Is the BOE feeling the pressure to do the same? If central bank officials start hinting at a possible rate hike, the pound could do a Far East Movement number and Rocketeer across the charts!
Of course this still depends on the upcoming economic data. For this week, the U.K. CPI report is one of the red flags on deck and this is due tomorrow 9:30 am GMT. Along with that, the retail price index is also set for release. Keep in mind that stronger than expected results could allow GBP/USD to break above 1.6400 and GBP/JPY to soar past 140.00.
On Wednesday, the spotlight will shift away from inflation data to labor reports. The claimant count change is due 9:30 am GMT that day and it could print a 3,100 decrease in joblessness for March. This could keep their unemployment rate steady at 8.0%.
That’s all, folks! Don’t forget to keep an eye out for any shifts in market sentiment because this could rock the pound this week too!