British Pound: CPI focus supports Sterling against US Dollar – Societe Generale

FXStreet Insights Team FXStreet

Societe Generale strategists note that dip buying in Sterling has kept GBP/USD trading above its 200-day moving average near 1.3403, even as Gilts remain under pressure. The pair trades within a 1.3400–1.3500 range, with investors assessing the appointment of new Chancellor John Healey and upcoming UK CPI data, which they expect to show a modest easing in headline and services inflation.

Sterling supported as investors eye CPI

"Dip buying in sterling keeps GBP/USD above the 200dma (1.3403) and halts the rebound in EUR/GBP. UK CPI for June will be published tomorrow. SG economics forecast a dip in headline to 2.7% yoy from 2.8%, below the BoE estimate, and in services to 3.6% from 3.7% but no change in core at 2.6%."

"Wage data was not a market mover for the BoE but the small decrease in private sector pay to 2.9% yoy is welcome and minor relief in the broader debate about inflation and threat of second round effects. The premium of Gilts over Bunds trades close to the highs of the Truss debacle in September 2022 at 140bp."

"Notwithstanding the decline in public borrowing by £4bn between May and June thanks to the fall in debt interest payments, the deficit is running £2.7bn ahead of the OBR forecast for the April to June period because of the overshoot in spending by £3.6bn. Receipts are up 7.2% yoy."

"Though the spread has come from just over 170bp at the end of 2024, there should be scope for further tightening if the new chancellor can navigate public finances to safer waters in the autumn budget. The structurally higher level of inflation in the UK compared to the eurozone is the second if not the most important part of the bond jigsaw. Political stability, a rare commodity since the EU referendum in 2016, could tempt investors to turn more bullish on Gilts provided inflation and levels of government spending can be brought under control. "

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

GBP/USD extends the drop to 1.3360

GBP/USD builds on Monday’s decline and briefly clinches five-day lows near 1.3360 on Tuesday. Cable’s extra pullback follows the better tone in the Greenback as uncertainty in the Middle East prompts investors to adopt a cautious stance. Meanwhile, an apathetic UK labour market report also collaborates with the selling pressure on the British Pound.

EUR/USD looks inconclusive near 1.1420

EUR/USD trades in a tight range in the low 1.1400s on Tuesday, struggling to gain momentum amid an equally absence of clear direction in the US Dollar (USD). Uncertainty surrounding the US-Iran conflict is capping the pair’s upside, while traders avoid taking significant positions ahead of Thursday’s ECB gathering.

Gold shows signs of life; focus is back to $4,100

Gold gains ground on Tuesday, reversing Monday’s pessimism and advancing toward the $4,100 mark per troy ounce. Nevertheless, uncertainty surrounding the Middle East conflict and rising expectations for a hawkish Fed policy outlook are expected to limit the precious metal’s bullish momentum in the near term.

XRP extends recovery as on-chain activity grows

Ripple (XRP) ticks up and trades around $1.13 at the time of writing on Tuesday. This rebound aligns with a broader recovery in the cryptocurrency market, attributed to reports that mediators between the United States (US) and Iran are seeking a 10-day cessation of strikes to find a way back to the signed Memorandum of Understanding (MoU).

The Iranian war has again risen

The Iranian war has again risen to the top of the economics factor list. There is no end in sight. Intelligence experts say the current level of offense/retaliation will not change minds in Tehran, while in Washington, Trump fears all-out war, which would mean boots on the ground.

US Dollar mid-year outlook: Exceptional currency, exceptional risks?

The US Dollar enters the second half of 2026 in a markedly different position from a year ago. The King currency has recovered, reflecting persistent US inflation, changing expectations for Fed policy, geopolitical tensions and renewed demand for defensive assets.