The GBPUSD moved up-and-down after stronger CPI. What are the charts telling traders?

The GBPUSD moved higher to a new high going back to 2022 after hotter than expected CPI data, but has reversed lower. The pair is back below the 2024 hgh at 1.3433, and the 2025 high from April at 1.3441 after spiking to 1.34695. Staying below those levels will keep the sellers in play. Move above and we should resume the upside momentum to new highs.

The EUR and JPY are also higher vs the USD (the USD is lower) to start the US trading day.

In the video above, I take a look at the price action and the technicals that are driving the price action to start the US trading session.

Regarding the UK inflation, it surprised to the upside in April, with headline CPI rising by 3.5% year-over-year (vs 3.3% expected, prior 2.6%). Core CPI climbed to 3.8% (vs 3.6% expected), and services inflation surged to 5.4% (vs 4.8% expected), pointing to persistent underlying pressures. The stronger-than-expected data significantly dents hopes for aggressive rate cuts from the Bank of England, with markets now pricing in just one 25 bp cut by year-end—if that. The report reinforces the view that inflation, not weak growth, is the dominant risk facing central banks, aligning with similar concerns for the ECB and the Fed.

ECB’s Centeno said the interest rate to prevent inflation from falling under 2%, may have to come below the neutral rate between 1.5% and 2.0%

Late yesterday, Cleveland Fed President Beth Hammack spoke and expressed concern over recent sentiment data, noting it reflects unease about the economic outlook. She emphasized that the Fed faces a tough balancing act if both inflation and unemployment become problematic. Hammack stressed the importance of monitoring how business decisions are affected by trade policies, and for now, believes the Fed’s best course is to “sit on its hands” and evaluate data closely while engaging with communities. She added that inflation expectations remain well-anchored, but any shift in those expectations could prompt the Fed to take action. “Uncertainty” is the key theme for Fed officials. The undercurrent is the fear of inflation but the economy matters too. So eyes are pealed to the data.

US MBA mortgage applications fell sharply by 5.1% in the week ending May 16, reversing the prior week’s 1.1% gain – and then some. The decline was broad-based, with the market index dropping to 238.5 (from 251.2), the purchase index down to 157.8 (from 166.5), and the refinance index slipping to 682.5 (from 718.1). Meanwhile, the average 30-year mortgage rate rose slightly to 6.92% from 6.86%, likely contributing to the pullback in activity.

The economic calendar only shows Canada new housing price index for April and the weekly EIA crude oil inventory data. Late yesterday the private data showed:

US stocks are lower with the futures implying:

• Dow Industrial average futures are down -325 points after falling -114.83 points or -0.27% yesterday
• S&P index futures are implying a decline of -35 points after yesterday’s -23.14 points or -0.39% decline
• Nasdaq futures are implying a decline of -131 points after falling -72.75 points or -0.38%

In the European markets, the major indices are lower at the start of the US session:

• German Dax, -0.21%
• France’s CAC, -0.66%
• UK FTSE 100, -0.02%
• Spain’s Ibex, -0.36%
• Italy’s FTSE MIB, -0.24%

In the US debt market, yields higher with the yield curve steepening. The two-year yield to his back of 4%. The 30-year yield is back above 5%:

• 2-year yield 4.002%, +3.2 basis points
• 5-year yield 4.119%, +5.2 basis points
• 10-year yield 4.544%, +6.4 basis points
• 30-year yield 5.035%, +6.8 basis points

In other markets:

• Crude oil up $0.65 at $62.86
• Gold is up $20.44 or 0.62% at $3310.34
• Bitcoin is trading down $353 at $106,502. Intraday high price reached $108,035