- GBP/USD struggles to lure buyers ahead of the crucial inflation data from the UK and the US.
- A combination of factors keeps the USD bulls on the defensive and lends support to the pair.
- The fundamental backdrop supports prospects for an extension of a one-week-old uptrend.
The GBP/USD pair ticks lower during the Asian session on Wednesday and moves away from over a two-week high, around the 1.2870-1.2875 region touched the previous day. The downside, however, remains cushioned as traders keenly await the release of the latest consumer inflation figures from the UK and the US.
The UK CPI will play a key role in influencing the Bank of England's (BoE) monetary policy decision and drive the British Pound (GBP). Apart from this, the crucial US CPI report will be scrutinized for cues about the Federal Reserve's (Fed) rate cut path, which, in turn, should provide some meaningful impetus to the US Dollar (USD) and help in determining the next leg of a directional move for the GBP/USD pair.
Ahead of the high-impact macroeconomic data, the GBP might continue to draw some support from Tuesday's UK data showing a surprise drop in the unemployment rate. This, to a larger extent, overshadowed a jump in the number of people claiming unemployment-related benefits, by 135 K in July, and a sharp deceleration in the wage growth, from the 5.7% YoY rate to 4.5% during the three months to June.
The USD, on the other hand, is undermined by expectations for bigger interest rate cuts by the Fed, bolstered by the softer-than-expected US Producer Price Index (PPI) on Tuesday. Apart from this, a generally positive risk tone keeps the USD bulls on the defensive and should act as a tailwind for the GBP/USD pair. Hence, any meaningful corrective slide might be seen as a buying opportunity and remain limited.
Economic Indicator
Consumer Price Index (YoY)
The United Kingdom (UK) Consumer Price Index (CPI), released by the Office for National Statistics on a monthly basis, is a measure of consumer price inflation – the rate at which the prices of goods and services bought by households rise or fall – produced to international standards. It is the inflation measure used in the government’s target. The YoY reading compares prices in the reference month to a year earlier. Generally, a high reading is seen as bullish for the Pound Sterling (GBP), while a low reading is seen as bearish.
Read more.Next release: Wed Aug 14, 2024 06:00
Frequency: Monthly
Consensus: 2.3%
Previous: 2%
Source: 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%, giving the monthly release its importance. An increase in inflation implies a quicker and sooner increase of interest rates or the reduction of bond-buying by the BOE, which means squeezing the supply of pounds. Conversely, a drop in the pace of price rises indicates looser monetary policy. A higher-than-expected result tends to be GBP bullish.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD: Rebound falters around 0.6650
![AUD/USD: Rebound falters around 0.6650](https://editorial.fxstreet.com/images/Markets/Currencies/Majors/AUDUSD/australian-currency-23690700_XtraSmall.jpg)
AUD/USD suffered the persistent weakness in the commodity complex and gave away part of the weekly robust advance to as high as the 0.6650 zone, or multi-day highs, on Wednesday.
EUR/USD reaches new 2024 highs well past 1.1000
![EUR/USD reaches new 2024 highs well past 1.1000](https://editorial.fxstreet.com/images/Markets/Currencies/Majors/EURUSD/money-13797882_XtraSmall.jpg)
EUR/USD advanced modestly and looked to consolidate the recent breakout of the key 1.1000 barrier, reaching new yearly peaks around 1.1050 following the vacillating price action around the Greenback post-US CPI.
Gold retreats sharply as investors seek high-yielding assets
![Gold retreats sharply as investors seek high-yielding assets](https://editorial.fxstreet.com/images/Markets/Currencies/Crosses/XAUUSD/gold-bar-32668024_XtraSmall.jpg)
Gold remains under modest bearish pressure and trades below $2,460 in the second half of the day on Wednesday. Although the US Dollar stays on the back foot after the July CPI data, XAU/USD finds it difficult to push higher as sentiment turns mixed.
Ethereum may see a rally following rising ETF inflows and low CPI data, key triangle could prove crucial
![Ethereum may see a rally following rising ETF inflows and low CPI data, key triangle could prove crucial](https://editorial.fxstreet.com/images/Markets/Currencies/Digital%20Currencies/Ethereum/Ethereum_Coins_31_03_XtraSmall.jpg)
Ethereum (ETH) is down 1.7% on Wednesday as low Consumer Price Index (CPI) inflation data and rising ETH ETF inflows hint that a rally may be imminent. However, a key trendline suggests ETH may repeat history by consolidating for a few weeks before beginning a fresh upward move.
Rebound in risk appetite takes a breather
![Rebound in risk appetite takes a breather](https://editorial.fxstreet.com/images/TechnicalAnalysis/Sentiment/RiskAppetite/credit-trap-gm177877263-26212151_XtraSmall.jpg)
US inflation failed to provoke much volatility this afternoon, while oil prices have fallen back from their recent highs, says Chris Beauchamp, Chief Market Analyst at online trading platform IG.