**GBP/USD Slips as Dollar Rebounds; Traders Await UK and US CPI Data**
*Adapted from original reporting by FXStreet*
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The GBP/USD currency pair recorded marginal losses during the latest New York session, slipping below the 1.2200 level. This move comes as the US Dollar saw a notable rebound, strengthening against multiple major currencies. Market participants are gearing up for upcoming inflation data from both the United Kingdom and the United States, data that is poised to set the direction for both the British Pound and the US Dollar in the coming weeks.
## GBP/USD Recent Performance
The British Pound has been under pressure recently, particularly following signals of ongoing divergence in economic performance and monetary policy outlooks between the United Kingdom and the United States. Having started the week with a slight bid tone above 1.2250, GBP/USD soon reversed course, gradually dropping below the 1.2200 handle as the session progressed. This renewed Dollar buying is largely attributed to shifting risk sentiment and anticipation of key economic data.
**Highlights from recent price action:**
– GBP/USD opened above 1.2250 before tumbling below 1.2200
– The US Dollar Index (DXY) rebounded sharply, crossing above the 106.00 region
– Bullish momentum in the Dollar weighed on major currencies, with Sterling among the most affected
## Dollar Strength Ahead of Key Data
The rebound in the US Dollar is tied to both technical and fundamental factors. Investors continue to price in the Federal Reserve’s hawkish rhetoric, which contrasts with more cautious signals from the Bank of England (BoE). Although Fed officials have left the door open for further hikes if warranted, markets are increasingly convinced that the peak in US interest rates may already be in place.
**Key drivers supporting the US Dollar:**
– Renewed risk aversion amid geopolitical tensions
– Higher US Treasury yields as investors seek safe-haven assets
– Robust US economic data, including upbeat retail sales and labor market indicators
– Anticipation of a resilient US inflation print, which could prompt the Fed to keep rates higher for longer
## Sterling’s Struggles: Domestic Uncertainty and BoE Pause
On the other side, Sterling faces multiple headwinds. The Bank of England has adopted a notably less aggressive stance compared to the US Federal Reserve. At its latest meeting, the BoE kept rates unchanged amid signs of slowing economic growth and increasing concern over recession risks. Market participants are now questioning whether the central bank has reached the end of its tightening cycle.
**Factors contributing to Pound weakness:**
– Tepid UK economic growth contrasted with US resilience
– Diminished expectations for further BoE rate hikes after recent hold
– Signs of moderation in UK CPI and wage growth data
– Political uncertainty with potential impacts on fiscal policy
## The Importance of Upcoming UK and US CPI Releases
All eyes now turn to the upcoming CPI inflation data releases from both the UK and the US. Scheduled to be published later in the week, these reports are expected to provide crucial insight into central bank policy trajectories.
### UK CPI Preview
– The UK’s Consumer Price Index is expected to show moderating inflation, reflecting downward pressure across multiple categories including energy and food
– Analysts anticipate headline CPI to fall to an annualized rate of around 4.9 percent, down from previous readings
– Core inflation is also eyed for signals on underlying price momentum, with expectations for a modest slowdown
The BoE has consistently communicated that it is closely monitoring inflation dynamics, especially in light of the recent ease observed in wage growth and consumer spending. A negative surprise in the inflation print could further reduce market expectations for additional rate hikes or even precipitate discussions about rate cuts in 2024.
### US CPI Outlook
– US headline inflation is expected to head slightly lower but remain above the Fed’s 2 percent target
– Month-over-month CPI is forecasted to rise by 0.3 percent,
Read more on GBP/USD trading.