The UK's inflation stood at 0.5% in December 2014 which is well below the 2% target, down from 1.2% in the previous month. The main reason for this was the steepest fall in wholesale energy prices during the second half of 2014. If energy prices continue falling further, inflation could temporarily turn negative as it was predicted in the BoE inflation report. Declining energy prices make the BoE maintain the key interest rate at the historical low of 0.5%.

At yesterday's session, the cable gave an upside breakout from the falling bearish channel. The weak US dollar helped the pound move higher. The cable managed to closed above 50Dsma. This is the first time when the pair closed above50Dsma after it was taken off and closed below it on July 29, 2014. At yesterday's session, we recommend intraday buying above 1.5270 with the targets at 1.5300, 1.5320, 1.5350, and 1.5375. The cable made a high at 1.5415. Today, at the Asian session, the cable is unable to breach the previous day's high. We recommend fresh buying above 1.5420 with the targets at 1.5440, 1.5500, and 1.5590. The intraday support is set at 1.5360, 1.5330, and 1.5300. We recommend selling only below 1.5300.