GBP/USD sees a downside to near 1.2500 as focus shifts to US inflation
- GBP/USD is declining towards 1.2500 as DXY strengthens on higher US inflation expectations.
- The DXY has continued its upside journey as the hangover of the upbeat US NFP is not faded yet.
- A better-than-expected BRC Like-for-Like Retail Sales have failed to cheer the pound bulls.
The GBP/USD pair has tumbled below 1.2520 in the Asian session after sensing barricades around 1.2526. The asset is declining gradually from Monday after failing to overstep the crucial resistance of 1.2580 on Monday. Investors should brace for a volatility contraction in the cable as the market participants have shifted their focus to the US Consumer Price Index (CPI), which is due on Friday.
A preliminary estimate for the annual US CPI is 8.2%, a tad lower vs. the former print of 8.3%. A minor slippage in the inflation rate is not going to safeguard the real income of US households. The Federal Reserve (Fed) has already announced rate hikes of 25 basis points (bps) and 50 bps in March and May respectively, whose effect is not yet visible on the price pressures.
No doubt, the Fed is going to feature a jumbo rate hike in its monetary policy announcement next week. However, a release of higher-than-expected CPI figures will bring forward more hurdles for Fed policymakers.
Meanwhile, the US dollar index (DXY) has displayed a bullish opening session. The DXY is carry-forwarding its bullish momentum displayed on Monday. The upbeat Nonfarm Payroll reported last week is the major reason behind a firmer rebound in the DXY.
On the pound front, bulls are not performing despite less-weak BRC Like-For-Like Retail Sales. The agency has reported the economic data at -1.5%, better than the consensus of -3.5% and the prior print of -1.7%. Next week, the monetary policy from the Bank o England (BOE) will be the key event.