FxWirePro: GBP/USD retreats as Bailey warns of prolonged inflation risks

• GBP/USD initially firmed but gave up ground  as investors digested Bank of England Governor Andrew Bailey speech.

• Bank of England Governor Andrew Bailey said on Thursday that governments need to step up efforts to restore confidence in their public finances as global bond markets face pressure from high borrowing and rising inflation linked to the Iran war..

• Bailey reiterated that the impact of higher energy costs on wider inflation had so far been modest, but warned that the longer prices remain elevated, the more difficult the inflation outlook becomes.

• Bailey’s comments come less than three weeks before Finance Minister John Healey delivers his first budget, which is expected to face tighter constraints from higher borrowing costs triggered by the Gulf conflict.

• Bailey said financial markets had seen unusually sharp moves recently, but there was no evidence of stressed conditions or illiquidity, while the economy had shown resilience in the face of the energy price shock.

•   Immediate resistance is located at 1.3298(38.2%fib), any close above will push the pair towards 1.3310(Higher BB)

•  Strong support is seen at 1.3166 (23.6%fib) and break below could take the pair towards 1.3107(Lower BB).

  Recommendation: Good to sell around 1.3240, with stop loss of 1.3320 and target price of 1.3180