The UK January inflation data came in below the market's expectations yesterday, with the CPI at 1.8% YoY and core inflation steady at 1.9% YoY, in line with the BoE's latest forecast which took some pressure off an eventual rate hike. Producer Prices Output were a bit more encouraging, up 0.4% MoM and 2.4% YoY, while the Retail Price Index dropped more than anticipated, down 0.9% MoM, but up 2.5% YoY. The spike in the Pound was a result of a report coming from the EU showing that the Union would favor extending the Brexit date, despite no formal request from the UK. Earlier in the day, UK Brexit Secretary Stephen Barclay said that it’s not in anyone's interest to have an extension to Brexit, while Irish PM Varadkar said that there's no such thing as a positive Brexit. The uncertainty surrounding UK's departure remains high, resulting in sellers jumping in GBPUSD on that spike. There're no relevant data scheduled in the UK today.
The Pound had a volatile session yesterday as it bounced towards 1.2950 (50-day moving average) and dropped back again towards 1.2830 (S1). The bears are still in control as long as price is trading below 1.2930 (R1). If price breaks below 1.2830 (S1), next strong support is at 1.2730 (S2).
Support: 1.2830 / 1.2730
Resistance: 1.2930 / 1.30