GBP/USD Forecast: US CPI Data Is A Major Risk For Recovery
GBP/USD (Pound/Dollar) has been recovering from its earlier losses amid the strength of the Pound Sterling. However, this recovery is at risk of being unraveled ahead of the US inflation data. If the inflation rises even further, it will provide grounds for the Fed to adopt an even more hawkish stance.
But for now, the sentiment surrounding the Sterling is positive and is being bought by investors. On the other hand, the US Dollar was sold against the EU currencies. However, the US mid-term elections are also coming ahead, and when we combine that with the inflation data, it seems that some major volatility is coming toward GBP/USD.
There are some experts who believe that inflation in the USA will rise even further, which will lead us to more rate hikes. As a result, the US economy will slow down, but it will make the USD stronger. As a result, the Pound Sterling stands to lose against the USD!
October's Inflation Numbers - A Major Trigger
According to experts, the most probable outcome of the US midterm elections is a split congress. As a result, there will be very few implications for the USD at best.
We all know that the election results will impact how the US government drafts its spending policy. However, the major event will not be the US elections... Instead, it will be the inflation data from October which will dictate the next direction for the US Dollar and the US economy.
However, while we focus on the political and economic situations in the USA, let's not forget that the Bank of England is also on an aggressive rate hike path, and the inflation in Britain is also rising.
So, for now, it will be all about which central bank adopts a more hawkish approach and attracts the investor's attention. For the short-term, it seems that GBP is winning the battle, but that could change with the US elections and the inflation data.