The GBP/USD pair remains in a near-term consolidation phase around the 1.2200 mark, as key inflation data from both the US and the UK, along with growth figures, take center stage in the midweek sessions. US Consumer Price Index (CPI) inflation is expected to pick up, although a softer-than-expected US Producer Price Index (PPI) reading has sparked fresh investor optimism that inflation may cool enough to prompt a shift toward rate cuts by the Federal Reserve (Fed).
Market Overview: US Inflation Data and Rate Cut Speculation
The December PPI figures showed headline inflation rising to 3.3% year-over-year (YoY), up from 3.0% in November, while core PPI climbed to 3.5% YoY, slightly above the previous 3.4%. Despite the figures coming in below expectations, they failed to spark significant investor optimism, as inflation pressures remain well above the Fed’s targets. With inflation still elevated, expectations of rate cuts are tempered, as softer PPI readings do not fully alter the outlook for tighter monetary policy.
UK and US CPI Data in Focus
On Wednesday, the UK will release its CPI data, with market expectations for a flat print of 2.6% YoY in the non-preliminary figure. Meanwhile, in the US, CPI is forecast to accelerate to 2.9% YoY from the previous 2.7%, continuing to hold well above the Fed’s 2% inflation target. These inflation metrics will play a crucial role in shaping market expectations regarding future interest rate decisions.
Technical Outlook: GBP/USD Struggles to Recover
The GBP/USD pair managed to maintain bids around the 1.2200 level on Tuesday, but the broader bearish trend remains intact after hitting a fresh 15-month low earlier this week. The pair is down nearly 4% in January alone and is on track to post its fourth consecutive monthly loss unless a bullish reversal emerges soon. As market participants await key inflation reports, the outlook for GBP/USD remains fragile, with the potential for further downside pressure if inflationary concerns persist.
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