# GBP/USD Forecast: Focus Turns to CPI Ahead of FOMC Next Week
*By Matt Weller, Forex.com*
The British pound has been in the spotlight as markets assess the shifting landscape of economic data from both the UK and the United States. As the GBP/USD currency pair holds near multi-week lows, traders are looking ahead to the upcoming Consumer Price Index (CPI) report in the United States, which will play a critical role in shaping expectations for next week’s Federal Open Market Committee (FOMC) policy decision. This article analyzes the latest price action, key drivers, and the path forward for GBP/USD as both sides of the Atlantic brace for pivotal economic releases.
## Recap: GBP/USD Under Pressure
GBP/USD has experienced notable volatility over the past few weeks, with the pair slipping to levels not seen since May as the US dollar regains strength. Several factors have contributed to this downward bias:
– A series of resilient US macroeconomic prints, signaling robust underlying growth.
– Hawkish rhetoric from Federal Reserve officials, diminishing hopes for early rate cuts.
– Mixed signals from the UK economy, with growth surprising to the upside but evidence of cooling inflation and lackluster consumer momentum.
– Ongoing uncertainty about the Bank of England’s next move as policymakers weigh risks to growth versus price stability.
The interplay of these factors has left GBP/USD trapped within a broader consolidation range. However, decisive upcoming data releases and central bank meetings may break the stalemate.
## US Economic Outlook: CPI and FOMC in Focus
Upcoming US data and central bank developments will heavily influence the near-term path for GBP/USD. Analysts are keenly awaiting the June US CPI data release, scheduled just ahead of the FOMC announcement. US inflation figures have repeatedly confounded expectations over the last twelve months, alternately fueling optimism for rate cuts or justifying a higher-for-longer stance.
### What to Watch in the Upcoming US CPI:
– **Headline CPI:** Consensus forecasts call for year-over-year headline inflation to ease towards the Fed’s target, extending the downward trajectory seen in recent months.
– **Core CPI:** A stickier measure excluding food and energy, core inflation will be critical in assessing underlying price pressures and whether the Fed’s preferred inflation gauge is moving convincingly towards 2 percent.
– **Shelter and Services Costs:** Persistent strength in shelter inflation and services components could delay rate cut prospects.
If CPI data comes in hotter than expected, it could further reinforce the dollar’s rally versus the pound, boosting Treasury yields and squeezing risk sentiment. Conversely, a downside inflation surprise would support a softer dollar, offering respite to GBP/USD bulls.
### FOMC Meeting: Guidance Over Action
The FOMC meeting next week is not expected to produce an immediate policy change, but the Fed’s guidance and outlook will be critical determinants for currency moves.
– **Dot Plot Update:** The Fed’s Summary of Economic Projections will update the so-called “dot plot.” The number of projected cuts in 2024 will be the main focus, given the market’s recent reduction in expectations from three cuts to just one or two.
– **Chair Powell’s Commentary:** Investors will parse Powell’s post-meeting press conference for signals about the Fed’s confidence in the inflation outlook, its view on labor market strength, and guidance on the timing of cuts.
– **Market Reaction:** If the Fed reiterates a patient approach and projects higher-for-longer rates, further dollar strength could push GBP/USD to fresh lows.
## UK Economic Backdrop: Growth Improves, Inflation Cools
Turning to the UK, recent economic data presents a mixed, but slightly optimistic, picture. The latest GDP figures have shown the economy returning to growth, escaping the shallow recession recorded late last year. Nevertheless, the inflation profile has softened, and the Bank of England (BoE) faces a tricky balancing act.
### Recent UK Economic Developments:
– **GDP Growth:** Monthly GDP data revealed surprising
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