**GBP/USD Retreats Ahead of Key US Inflation Data**
*Original Author: Neelam Pandey, SSB Crack News (credit: [news.ssbcrack.com](https://news.ssbcrack.com/gbp-usd-retreats-ahead-of-key-us-inflation-data/))*
The GBP/USD currency pair entered a cautious retreat on Monday, ahead of critical upcoming US inflation data that could have a significant impact on the United States dollar and, consequently, global currency markets. As traders and investors globally brace for the latest Consumer Price Index (CPI) data from the US, the pound sterling fluctuated against the greenback, drawing attention to the myriad of factors shaping its direction. The interplay between interest rate expectations, macroeconomic releases, and market sentiment set the stage for a potentially volatile week for GBP/USD.
This article explores the factors behind GBP/USD’s recent performance, analyzes the implications of the upcoming US inflation print, assesses key technical levels, and examines what traders should watch in both the UK and US landscapes.
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## Recent Performance of GBP/USD
GBP/USD has displayed choppy trading behavior in recent sessions. After touching highs near 1.2850 last week, the pair dropped below the 1.2700 handle, reflecting investor caution and the risk-off tone prevailing in broader financial markets.
Factors that have influenced GBP/USD in the recent period include:
– **Mixed Economic Data from Both Sides of the Atlantic:** The pair responded to the varying strength of economic releases, with US data at times bolstering the dollar, and UK statistics occasionally lending strength to the pound.
– **Shifting Central Bank Rate Expectations:** Diverging projections for potential rate cuts by the Federal Reserve and the Bank of England (BoE) have whipsawed the pair.
– **Geopolitical and Risk Sentiment:** Concerns about global growth, market risk aversion, and geopolitical events have also contributed to the pair’s direction.
### Major Highlights in Recent Moves
– Last week, GBP/USD attempted a breakout above 1.2850 but faced heavy resistance, leading to a sharp reversal.
– The pair declined, falling below the 1.2700 region where it found modest support as the market awaited further catalysts.
– Intraday volatility increased, with traders cautious ahead of high-impact US releases.
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## Key Catalysts: US Inflation Data
The main event this week is the release of the US Consumer Price Index (CPI) for May. As inflation remains a cornerstone of central bank policy, its outcome will likely have a major impact on currency markets, with GBP/USD among the most sensitive pairs.
### Market Expectations for US CPI
– Headline CPI is expected to remain at 0.3% month-on-month, while the annual rate is projected at 3.4%.
– Core CPI (which excludes food and energy) is also expected at 0.3% monthly, with an annual figure at 3.5%.
The numbers matter because they will inform Federal Reserve policy, which has recently leaned more hawkish. If inflation moderates meaningfully, traders may start to bet more confidently on Fed rate cuts later in the year, weighing on the US dollar. Conversely, sticky inflation could lead to further dollar strength if the Fed holds or increases its hawkish tone.
### How US Inflation Data Impacts GBP/USD
– Higher-than-expected CPI supports the US dollar, putting downward pressure on GBP/USD.
– Softer CPI could weigh on the dollar, allowing GBP/USD to stage a recovery or attempt another leg higher.
– Volatility is likely during and after the data release as markets re-price expectations for upcoming FOMC meetings.
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## Federal Reserve Meeting and Policy Outlook
Also on the calendar this week is the Federal Reserve’s monetary policy decision, alongside new economic projections and an updated “dot plot” revealing officials’ expectations for future rates.
Key themes for currency markets include:
– **Tone of the Fed
Read more on GBP/USD trading.