- GBP/USD remains within a familiar range held since the beginning of this week.
- Expectations of a Fed rate cut in September continue to weaken the USD and offer some support.
- Fading bets on a BoE rate cut in August favor bulls ahead of UK CPI report.
The GBP/USD pair extends its sideways consolidation move for the third consecutive day on Wednesday and trades around the 1.2970 region during the Asian session. Spot prices, meanwhile, remain well within range of a one-year peak touched on Monday and the fundamental backdrop supports prospects for an extension of a two-week-old uptrend.
The US Dollar (USD) finds some support from the upbeat US retail sales data released on Tuesday, which pointed to consumer resilience and bolstered economic growth prospects for the second quarter. This, in turn, is seen as a key factor acting as a headwind for the GBP/USD pair as traders eagerly await the crucial UK consumer inflation figures before positioning for the next directional move.
UK headline CPI is expected to come in at 0.1% in June compared to 0.3% in the previous month, while the annual rate is anticipated to remain stable at 2.0% y/y. Looking at key data risk, the diminishing odds of a rate cut by the Bank of England (BoE) in August, especially after the UK economy grew faster than expected in May, continue to offer some support to the British Pound (GBP) and the GBP/USD pair.
Meanwhile, markets are now pricing in more than 90% chance of the Federal Reserve (Fed) cutting borrowing costs in September, which is keeping US Treasury yields depressed near multi-month lows and should keep the USD capped. This, in turn, validates the positive near-term outlook for the GBP/USD pair, suggesting that any immediate market reaction to the softer UK CPI report is more likely to be limited.
Economic indicator
Consumer Price Index (YoY)
The CPI publishes it National Statistics and measures the change in prices of a basket of goods and services purchased by households for consumption. The CPI is the main indicator for measuring inflation and changes in consumer trends. A reading higher than expectations is bullish for the pound, while a reading lower than expectations is bearish.
Next post:
Wed Jul 17, 2024 06:00
Frequency:
Monthly
Dear:
2%
Previous:
2%
Fountain:
Office for National Statistics
The Bank of England is tasked with keeping inflation, as measured by the headline Consumer Price Index (CPI), at around 2%, which gives the monthly release its importance. A rise in inflation implies ever-faster interest rate increases or a reduction in bond buying by the BOE, which means squeezing the supply of pounds. Conversely, a fall in the pace of price increases signals looser monetary policy. A higher-than-expected outcome tends to be bullish for the GBP.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
