​GBP Faces Pressure with Inflation Rate at 4-year’s Low

May 21st from WikiFX News. Britains inflation rate dropped to the lowest since August, 2016, raising speculations that the Bank of England will have to take further measures to boost demand.

In addition, Britan‘s CPI grew 0.8% year-on-year, lower than economists’ expectations. The figure may kindle an even more heated debate over whether the central bank should introduce negative interest rate for the first time.

HSBC downgraded its forecast of GBP/USD before the end of the year from the previous 1.35 to 1.2, while pointing out the risks including Britains fiscal well-being(as the worst of G10 members) and Brexit: euro is expected to rise from 0.81 to 0.87 against pound before the end of the year, the British government again dismissed the possibility of extending the Brexit transitional period, while it seems unlikely for the two sides to completely settle a free trade deal before the end of 2020.

With Britain sinking into a severe recession and the economy in sluggish recovery, structural factors may further weigh on the pound.

GBP/USD daily pivot points: 1.2243-1.2253

S1 1.2210 R1 1.2276

S2 1.2182 R2 1.2314