GBP/USD has been trading in a familiar range since the start of the week, with September Fed rate cut expectations weakening the USD and supporting the pair. The likelihood of an August BoE rate cut has decreased, favoring bullish sentiment ahead of the UK CPI report. The pair remains near a one-year high, with potential for further upside in the two-week uptrend.
The USD received support from positive US Retail Sales data, highlighting consumer resilience and economic growth prospects for the second quarter. This has acted as a headwind for GBP/USD as traders await the UK CPI figures before positioning for the next move. The UK CPI is expected to show a decrease in monthly inflation to 0.1% for June, with a steady 2.0% YoY rate. Diminishing chances of a BoE rate cut in August following strong May economic growth has supported the GBP and the pair.
Markets are currently pricing in a over 90% chance of a Fed rate cut in September, keeping US Treasury bond yields low and limiting the potential for USD gains. This supports a positive outlook for GBP/USD in the near-term, suggesting that any reaction to the softer UK CPI report is likely to be limited. The pair remains within reach of a one-year high, with potential for further gains as market conditions evolve.
The UK Consumer Price Index (CPI) is a key economic indicator released monthly by the Office for National Statistics, measuring consumer inflation in the UK. The YoY reading compares prices in the reference month to a year earlier, with a higher reading seen as bullish for GBP and a lower reading as bearish. The CPI is used as the inflation measure for the government’s target, providing insights into the overall economic health of the country.
Overall, the GBP/USD pair continues to trade within a familiar range, with support from weakening USD due to Fed rate cut expectations. The potential for an August BoE rate cut has decreased, favoring bullish sentiment ahead of the UK CPI report. Positive US Retail Sales data has supported the USD, but diminishing chances of a BoE rate cut in August following strong economic growth in May has provided support for the GBP. Market expectations of a Fed rate cut in September have also limited USD gains, supporting a positive outlook for GBP/USD. The upcoming UK CPI report will provide further insights into the economic health of the UK and potential market movements for the pair.
