The pound is down to the lows for the day after UK inflation in January eased and hints that price pressures may have already peaked. The headline annual inflation rate may still be above 10% but the good news is that at least the situation isn't worsening, with the monthly figures also showing a decline in both the headline and core readings.
This has seen GBP/USD fall to 1.2100 from around 1.2135 earlier and price is now running into a test of its 200-hour moving average (blue line) at 1.2097. A push below that will see sellers regain near-term control and look for another attempt at 1.2000 next.
The drop in cable is also helped by a stronger dollar today, with the overall risk mood struggling as broader markets continue to digest the US CPI data from yesterday.
Going back to the inflation report and the pound, this still means that the BOE will keep tightening policy further but it gives them a reason to slow down on the pace of tightening at least - matching what markets are predicting, that being 25 bps increments next. That explains the softer reaction in the currency to the data.
In the bigger picture though, cable is still very much tied to these key technical levels highlighted here.
