GBP/USD extends gains near 1.2230, focus on UK, US inflation data

GBP/USD extends its gains for the second consecutive day, trading higher around 1.2230 during the Asian session on Monday. The GBP/USD pair might have received upward support from the better-than-expected preliminary Gross Domestic Product (GDP) from the United Kingdom (UK) released on Friday, coupled with a weaker US Dollar (USD).

The UK's GDP for the third quarter declined to 0.0% compared to the market consensus of a 0.1% contraction. On an annual basis, GDP remained consistent by growing at 0.6%, missing lower than the 0.5% estimated. These figures could improve the market sentiment for the Pound Sterling (GBP).

Even though the data suggests that the UK seems to avoid a recession in 2023, it still teeters on the brink of a stagflation scenario. Inflation is lingering at elevated levels, coupled with a higher unemployment rate. Tough times for economic balance.

Federal Reserve (Fed) Chair Jerome Powell spiced things up in his Thursday speech, surprising with a more hawkish stance than expected. Worries lingered as he expressed concerns that the current policies might not be doing enough to corral inflation toward the coveted 2.0% target.

However, Friday brought a new twist for the US Dollar (USD). The preliminary US Michigan Consumer Sentiment data took center stage, revealing a dip in consumer mood from 63.8 in the previous month to 60.4 in November.

GBP/USD traders are gearing up for a significant week ahead, focusing on the UK economic docket set to unveil employment and inflation data on Tuesday. Meanwhile, on the US front, all eyes on the currency market will likely be on the US Consumer Price Index (CPI) on the same day.