GBP/USD, Oil Forecast: Two trades to watch

GBP/USD rises ahead of US CPI data

• US core CPI is expected to ease to 3.1%
• BoE Catherine Mann warned about the demand outlook
• GBP/USD rises but remains below the 50 SMA

GBP/USD is rising for a second day, reaching 1.2450 as attention turns to US inflation data published at 1330 GMT.

Expectations are for core CPI, which excludes more volatile items such as food and fuel, to ease to 3.1%, down from 3.2% in December. Meanwhile, headline inflation is expected to hold steady at 2.9% in January, in line with December. On a monthly basis, headline and core CPI are set to rise 0.3%.

The data could influence how long the Federal Reserve will keep interest rates on hold at 4.25 to 4.5%. Yesterday, Federal Reserve chair Jerome Powell said in his first of the two-day testimony before Congress that the central bank is in no rush to cut interest rates. He highlighted economic growth and sticky inflation pressures as reasons to keep rates on hold until the data dictate otherwise.

The pound is pushing higher despite the uncertain outlook from the Bank of England. Yesterday, hawk-turned-dove policy member Catherine Mann highlighted concerns over the demand outlook and, therefore, sees the need to ease monetary policy at a faster pace. She voted to cut rates by 50 basis points in the meeting last week.

Bank of England policymaker Megan Greene will speak today and could offer further insight into the outlook for interest rates. The central bank reduced rates by 25 basis points in the February meeting.

Attention will then turn to Friday's key for GDP release which is expected to show that the economy contracted 0.1% quarter on quarter.

GBP/USD forecast technical analysis

GBP/USD’s recovery from 1.21 continues to be limited by the 50 SMA at 1.25. The downside is also being capped by 1.2350, as the pair trades in a holding pattern.

Buyers, supported by an upward-pointing RSI above 50, will need to rise above 1.25 and 1.2530 to create a higher high and extend gains to 1.26.

On the downside, a break below 1.2350 and 1.23 the April low, opens the door to 1.21.

Oil falls ahead of EIA stockpile & US CPI data

• API oil inventories rose by 9.4 million barrel
• EIA lifted its US output forecast
• Oil hovers at 73.00, below the 100 SMA

Oil prices are heading lower, snapping a three-day winning run as US crude stockpiles and economic uncertainty weigh on sentiment.

According to the API, crude oil stockpiles rose by 9.4 million barrels in the week ending February 7th, while gasoline inventories fell by 2.5 million barrels. Data from the EIA will be released later today.

Meanwhile, the EIA raised its estimate for US crude oil production whilst leaving its demand forecasts unchanged. It now expects the US crude production to average 13.59 million barrels a day in 2025, up from its previously expected 13.55 million barrels today.

Pension will now turn to US inflation data with core inflation expected to ease to 3.1% and headline to hold steady at 2.9%. A hotter-than-expected inflation print could fuel hawkish Fed expectations and pull oil lower. However, a cooler print could lift

Geopolitical tensions and concerns over escalating trade frictions influence the market mood. A trade war could slow global growth, hurting the oil demand outlook.

Oil forecast technical analysis

After recovering from the 70.00 low, oil is struggling to gain momentum having broken above the 71,50 – 72.250 resistance zone and is hovering around 73.00 the 100 SMA.

Buyers will need to rise above this level to extend gains towards the 200 SMA at 74.00 and then 75.00 the February high. A rise above here creates a higher high.

Failure to rise above the 100 SMA could see the price fall towards the 50 SMA at 72.15, and below here, the 70.00 support comes back into focus. A break below here creates a lower low.