UK CPI came in today at -0.1% missing the 0% estimate. This means that inflation is non existent currently in the UK economy. Analysts expected UK rates initially to start rising Q1 2016 with a total of 0.75% increase in 2016. Due to recent data the first rate rise was pushed back to Q2/Q3 with an expectation of 0.5% total increase in 2016. With the key CPI number missing today it is highly likely that analysts will again push back the first UK BOE rate hike to Q3/Q4 of 2016 with only a total of 0.25% increase in 2016.
Money chases return and in the forex market return is partly based around interest rate differentials with the interest rate outlook for the GBP stretching further out this should weaken the GBP in the near term. However the GBP fundamentally should remain the 2nd strongest currency after the USD given the interest rate bias going forward for the GBP is still up.
Fundamentals are what drive the orders to buy/sell and move price, technicals are based on trying to identify fundamentals via orderflow on a chart after the fact.
