GBP/USD Forecast: Pound Sterling Firm as CPI Leaves Fed Bets Intact

– Written by


Frank Davies

STORY LINK GBP/USD Forecast: Pound Sterling Firm as CPI Leaves Fed Bets Intact

The Pound to US Dollar exchange rate (GBP/USD) traded without clear direction on Tuesday, after the latest US inflation figures failed to provide markets with a decisive catalyst.

At the time of writing, GBP/USD was hovering around $1.3470, leaving the pairing little changed from its opening levels.

The Pound (GBP) edged sideways through the session, with a sparse UK economic calendar offering Sterling little in the way of guidance. In the absence of domestic data, price action was driven largely by broader market sentiment.

That mood remained muddled. With risk appetite lacking conviction, the increasingly risk-sensitive Pound struggled to attract demand against both higher-risk currencies and traditional safe havens, as investors opted to stay cautious and avoid bold positioning.

Meanwhile, the US Dollar (USD) was also confined to a narrow range as traders digested the latest US consumer price index data. The inflation release prompted a brief burst of volatility before markets quickly settled.

Headline inflation was unchanged at 2.7% in December, in line with forecasts, while core inflation held at 2.6%, undershooting expectations for a rise to 2.7%. With the data broadly matching projections, the report did little to alter expectations for Federal Reserve interest rate cuts, leaving the ‘Greenback’ without a clear directional impulse.

A mixed global market backdrop further limited movement in the safe-haven currency, reinforcing USD’s subdued performance.

GBP/USD Forecast: US Retail Sales and Central Bank Rhetoric in Focus

Looking ahead, attention turns to Wednesday’s US retail sales data. A rebound in consumer spending could offer the US Dollar some support, particularly if it suggests resilience in household demand.

However, any USD gains may prove short-lived amid a packed schedule of speeches from Federal Reserve officials. If policymakers strike a broadly dovish tone, markets may revive expectations for further rate cuts, placing renewed pressure on the Dollar.

For the Pound, focus will be on comments from Bank of England Deputy Governor Dave Ramsden. As one of the policymakers who backed a rate cut last month, any signals that he remains open to further easing could weigh on Sterling and influence the direction of GBP/USD.

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TAGS: Pound Dollar Forecasts