GBP/USD Forecast: Pound Sterling Steady despite Softer UK Inflation

– Written by


James Fuller

STORY LINK GBP/USD Forecast: Pound Sterling Steady despite Softer UK Inflation

The Pound US Dollar (GBP/USD) exchange rate traded within a tight corridor on Wednesday as investors digested the UK’s latest inflation update.

At the time of writing, GBP/USD was hovering near $1.3547, showing little deviation from the day’s opening levels.

The Pound struggled for direction following the release of January’s consumer price index figures.

Data from the Office for National Statistics showed headline inflation easing to 3%, its lowest level since March last year.

The slowdown was largely attributed to falling energy costs and cheaper airfares, which helped offset price increases in areas such as hospitality and accommodation.

The latest figures reinforced expectations that the Bank of England will opt for a 25-basis-point interest rate cut at its March meeting, particularly in the wake of weaker employment data earlier in the week.

However, as markets had already largely priced in a near-term move from the Bank of England, Sterling avoided a sharp selloff and instead traded in subdued fashion.

The US Dollar also remained confined to narrow ranges after the publication of the latest durable goods orders data.

Figures from the US Census Bureau revealed order growth tumbled from 5.4% to -1.4% in December, a slightly smaller decline than the 2% fall markets had anticipated.

Despite the contraction, USD losses were limited during the European session as investors refrained from taking strong positions ahead of the release of minutes from the Federal Reserve’s January policy meeting, which may offer clues on the central bank’s outlook.

GBP/USD Forecast: US Growth and UK PMI Data in Focus

As the week progresses, attention will shift to the latest US GDP figures, which could inject fresh volatility into GBP/USD.

Current forecasts indicate US economic growth slowed from an annualised 4.4% to 3% in the fourth quarter, partly reflecting the impact of the extended government shutdown. A sharper-than-expected slowdown may weigh on the US Dollar.

For Sterling, focus will turn to upcoming UK retail sales data and the latest services PMI reading. Evidence of resilient consumer spending and sustained strength in the services sector could help the Pound regain ground heading into the weekend.

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TAGS: Pound Dollar Forecasts