Today, markets continue to consolidate, particularly the Forex market, as they await the release of new US inflation data next Wednesday, a week from now. In my view, this is the most important indicator, as it should have a direct and immediate impact on all markets.

Expectations that the Federal Reserve will raise its key interest rate by a quarter of a percentage point this month have declined noticeably amid the extremely negative situation in the labor market, as evidenced by the US Department of Labor report released last Friday. This has led major currency pairs in the Forex market to consolidate following a limited, local weakening of the US dollar. However, the situation could change radically if the consumer inflation figures released next week show that inflation is continuing to rise, even if the increase is not particularly strong. This news could revive speculation about a rate hike later this month.

But let us return to the European continent, particularly the UK. If we look at the technical analysis charts, we can see that the British pound against the US dollar has effectively been trading within a narrow range for two weeks.

Why is this happening, and what should we expect from sterling against the dollar?

The main reason is the decline in expectations for the number of rate hikes in the United States. Previously, it was expected that the Fed could raise borrowing costs in October and December, but the weak labor market situation has reduced the probability of a rate hike this month, which has led to the dollar's weakening. However, the steady rise in US Treasury yields indicates persistent expectations of higher interest rates. Yes, a similar process is also taking place in the UK, but sterling's importance to global trade is limited compared with the dollar. In addition, the US economy remains resilient and is even showing growth. The situation in the UK remains extremely unfavorable. The country's involvement in the Ukrainian crisis has already led not only to economic problems but also to political problems, which is a significant negative factor for the local currency, especially against the dollar.

Given this, it can be assumed that GBP/USD has further downside potential if the US consumer inflation figures released next week come in above forecasts.

Forecast of the Day:

GBP/USD

The pair is showing a local downward reversal near the strong support level of 1.3180. It could fall toward this level and, after breaking below it, continue declining toward 1.3049. The 1.3236 level could serve as a selling level. The stop-loss could be placed at 1.3312.

AUD/USD

The pair is trading above the 0.6965 support level, and a break below this level could push it down toward 0.6912. The 0.6962 level could serve as a selling level. The stop-loss could be placed at 0.6993.