GBP/USD rebounds toward 1.3450 after losing over 1% in previous session, UK CPI eyed

GBP/USD edges higher ahead of the UK Consumer Price Index data release for May.
The US Fed is widely expected to keep the interest rate unchanged at 4.5% on Wednesday.
The US Dollar may appreciate as safe-haven demand increases amid ongoing geopolitical conflicts in the Middle East.

Akhtar Faruqui FXStreet

GBP/USD edges higher after registering over 1% losses in the previous day, trading around 1.3440 during the Asian hours on Wednesday. Traders will focus on the UK Consumer Price Index (CPI) data for May, scheduled to be released later in the day. The inflation data is anticipated to show that price pressures have cooled down. On Thursday, the Bank of England (BoE) is also expected to keep interest rates steady at 4.25%.

Markets expect the US Federal Reserve (Fed) to keep the interest rate unchanged at the June meeting scheduled later in the North American session. Traders now see a nearly 80% probability of a Fed rate cut in September, followed by another one in October, per Reuters.

Traders will closely observe the Federal Open Market Committee’s (FOMC) statement regarding monetary policy, looking for forward guidance amid persistent tariff uncertainty and rising geopolitical tensions.

However, the GBP/USD pair faced challenges as the US Dollar gained ground amid increased safe-haven demand, driven by increasing geopolitical tensions in the Middle East. Israel and Iran continue their cycle of retaliation. However, Tehran has reportedly urged several countries, including Oman, Qatar, and Saudi Arabia, to urge US President Donald Trump to declare an immediate ceasefire.

On Tuesday, US President Donald Trump posted on his social media platform, calling for Iran’s “unconditional surrender.” Investors are concerned that the United States will participate in the Israel-Iran conflict.

Economic Indicator

Consumer Price Index (YoY)

The United Kingdom (UK) Consumer Price Index (CPI), released by the Office for National Statistics on a monthly basis, is a measure of consumer price inflation – the rate at which the prices of goods and services bought by households rise or fall – produced to international standards. It is the inflation measure used in the government’s target. The YoY reading compares prices in the reference month to a year earlier. Generally, a high reading is seen as bullish for the Pound Sterling (GBP), while a low reading is seen as bearish.

Why it matters to traders?

The Bank of England is tasked with keeping inflation, as measured by the headline Consumer Price Index (CPI) at around 2%, giving the monthly release its importance. An increase in inflation implies a quicker and sooner increase of interest rates or the reduction of bond-buying by the BOE, which means squeezing the supply of pounds. Conversely, a drop in the pace of price rises indicates looser monetary policy. A higher-than-expected result tends to be GBP bullish.

Author

Akhtar Faruqui

FXStreet

Akhtar Faruqui is a Forex Analyst based in New Delhi, India. With a keen eye for market trends and a passion for dissecting complex financial dynamics, he is dedicated to delivering accurate and insightful Forex news and analysis.

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