GBP/USD sideways in mid 1.3160s ahead of UK inflation and Fed Powell’s speech

The GBP/USD pair is juggling in a narrow range of 1.3156-1.3170 as the market participants are waiting for the unfolding of the UK’s Consumer Price Index (CPI) numbers, which are due on Wednesday. A preliminary estimate for the UK’s CPI is 5.9%, much higher than the previous print of 5.5%.

The UK’s CPI numbers on Wednesday hold significant importance as the Bank of England (BOE) has increased its interest rates by 25 basis points (bps) last week. The BOE has elevated its borrowing rates for the third time in a row to corner the roaring inflation. Also, the BOE was the first central bank that raised its interest rates after the pandemic of Covid-19. So UK’s inflation print on Wednesday will dictate the likely monetary policy action by the BOE in its next policy announcement.

Apart from that, the British domain will also report the monthly and yearly Producer Prices Index (PPI) Core Output on Wednesday. A preliminary estimate for the monthly PPI Core Output is 0.9%, lower than the previous print of 1.1% while the yearly PPI Core Output is likely to land higher at 10% against the prior figure of 9.3%.

Meanwhile, the US dollar index (DXY) has reclaimed 98.00 decisively on rising bets over the six more interest rate hikes by the Federal Reserve (Fed) this year. Apart from that, the negative tone in the market amid uncertainty over the meeting between US President Joe Biden and NATO allies on Thursday has restricted the cable in a narrow territory.

Adding to the UK’s inflation, investors will also focus on speech Fed’s Chair Jerome Powell to get some more insights about the likely strategy of the Fed policymakers to tackle inflation, which is due on Wednesday.