GBP/USD Forecast: US Dollar Fails to Rally as US CPI Matches Expectations

– Written by


David Woodsmith

STORY LINK GBP/USD Forecast: US Dollar Fails to Rally as US CPI Matches Expectations

The Pound US Dollar (GBP/USD) exchange rate advanced on Wednesday, even after the latest US inflation figures showed price pressures continued to build.

At the time of writing, GBP/USD was trading near $1.3401, up approximately 0.2% from the start of the session.

The US Dollar (USD) struggled to attract meaningful support on Wednesday as investors assessed the latest US consumer inflation data.

Figures released by the Bureau of Labor Statistics showed headline inflation accelerated from 3.8% to 4.2% in May, reaching its highest level in over three years. Meanwhile, core inflation edged up from 2.8% to 2.9%.

While the data reinforced expectations that the Federal Reserve may need to maintain a restrictive policy stance, the inflation figures matched market forecasts, limiting their impact on USD exchange rates.

With no major surprises in the report, many investors opted to hold back from placing aggressive bets on the ‘Greenback’.

The Pound (GBP) traded in a tight range through Wednesday’s session as the absence of notable UK economic releases left Sterling without a clear source of direction.

At the same time, conditions in the UK bond market remained relatively calm. Gilt yields were broadly stable, helping to ease concerns over borrowing costs and removing a key driver of recent fluctuations in the currency.

As a result, Sterling was largely guided by external market forces rather than domestic developments.

Near-Term GBP/USD Forecast: US Producer Prices and UK GDP in Focus

Attention now turns to the latter half of the week, where the latest US producer price index could provide fresh direction for the Pound to US Dollar (GBP/USD) exchange rate.

Economists expect factory-gate inflation to ease in May. If producer prices rise by less than anticipated, it may help cool expectations for future inflation and weigh on demand for the US Dollar.

For Sterling, the spotlight will fall on the UK’s latest GDP figures.

April’s growth reading is forecast to show the economy contracted by 0.1% month-on-month, reflecting the impact of ongoing disruption linked to the Middle East crisis. A weaker growth print could reduce expectations that the Bank of England (BoE) will consider raising interest rates in the near term, potentially limiting support for the Pound.

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TAGS: Pound Dollar Forecasts