GBP/USD remains capped below 1.3200 as sterling fails to emulate euro’s post-ECB gains, US CPI now eyed

As Wednesday’s broad optimism that saw global equities rally fades on Thursday ahead of remarks from ECB President Christine Lagarde after a surprisingly hawkish ECB policy announcement, and ahead of the release of key US inflation data for February, following earlier high-level Russia/Ukraine meetings that seemingly didn’t go as well as hoped, GBP/USD remains capped below 1.3200. The pair is currently trading flat in the 1.3175 area, having failed to track the post-ECB move higher in the euro as 1.3200 continues to act as a barrier. The pullback in global equities following yesterday’s rally, which some said at the time wasn’t fully rational giving the still bleak geopolitical picture in Ukraine and recent historic surge across commodity markets, isn’t the only thing blocking GBP/USD from advancing.

Traders are having a tough time pushing the pair above resistance in the form of last year’s lows in the 1.3160-70 area. Should broad optimism return, perhaps in the form of fresh hope for a Russia/Ukraine ceasefire, or perhaps if US inflation data surprises to the downside (hurting USD), an upside break is on the cards. That would open the door for GBP/USD to rally towards late February/early March lows in the 1.3270 area.

But on the other hand, a hotter than expected US inflation report (for reference, headline CPI is seen nearing 8.0%) could trigger a drop back towards this week’s sub-1.3100 lows. Bear in mind that the upcoming data is for February, prior to the breakout of war in Ukraine and prior to the historic surge in global commodity prices. There is always a risk that Thursday’s report triggers fresh chatter about a 50bps hike from the Fed later this month.