GBP/USD Outlook: Pound Holds 1.26 On Uptick In UK CPI
The Pound was mostly flat against the US Dollar on Wednesday following the publication of the UK’s latest consumer price index (CPI).
The Pound US Dollar (GBP/USD) exchange rate traded mostly flat on Wednesday following the publication of the UK’s latest consumer price index (CPI).
At the time of writing the GBP/USD was trading at around $1.2618, virtually unchanged from Wednesday’s opening levels.
The Pound (GBP) struggled to garner investor attention against the majority of its peers on Wednesday despite the publication of the
UK’s latest inflation reading.
The latest index revealed that both headline and core inflation rose in January.
Headline inflation ticked up from 2.5% to 3.0% rather than a 2.8% expectation, while core inflation climbed from 3.2% to 3.7% as forecast.
The data did serve to undermine Bank of England (BoE) interest rate cut bets in March; however, Sterling failed to capitalise on the positive release, and remined mostly rangebound against its counterparts regardless.
The US Dollar (USD) fluctuated against the majority of its peers on Wednesday and even dipped against several of its riskier rivals as USD investors awaited the latest Federal Open Market Committee (FOMC) meeting minutes.
The Greenback’s downside was likely primarily due to a cautiously upbeat market mood, which sapped demand for the safe haven USD.
Furthermore, USD investors were also likely cautious to place any overly aggressive bets on the American currency ahead of the latest meeting minutes, due out in the evening.
The minutes have the potential to see the ‘Greenback’ rebound should the Federal Reserve stick to its recently hawkish narrative.
Looking ahead, the primary catalyst of movement for the Pound US Dollar exchange rate on Thursday will likely be several mid-tier data release from the UK and the US.
Looking at the Pound, the UK will release its latest CBI industrial trends order survey while the US will release its latest initial jobless claims.
Both releases can infuse fresh headwinds into the GBP/USD exchange rate, significantly if either index deviates from market expectations.
Adam Solomon
Contributing Analyst
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