GBP/USD is pointing to an extended downside correction

GBP/USD has retreated from the highs amid fresh US inflation fears. Britain's reopening, the improving political landscape and BoE's move toward the exits are already in the price, therefore, cable is set to slide, FXStreet’s Analyst Yohay Elam reports.

Specter of inflation dominates the conversation in financial markets

“Dallas Federal Reserve President Robert Kaplan reiterated his warnings about an overheating US economy, and his words overshadowed that of his colleagues, who repeated the line that rising prices are temporary. Moreover, China's producer prices beat estimates, showing that increases in commodity costs are creeping into other areas of the economy.” 

“Investors are holding their breaths ahead of Wednesday's US Consumer Price Index statistics for April. The wait for the data may keep the lid on cable, despite sterling's impressive list of reasons to rise.”

“The Bank of England's slowing down of its bond-buying scheme last week kicked off sterling´s gains. Another booster came from Scotland, where the Scottish National Party fell short of an absolute majority, slowing their strive for an independence referendum. Last but not least, Britain's consistent march toward returning to normal – with the next phase due on Monday.” 

“Some resistance is at the daily high of 1.4145, followed by the May peak of 1.4160. Support is at 1.41, the round number, followed by 1.4070 and 1.4050.”