GBP/USD slipping as markets hunker down ahead of the US inflation risk event

The GBP/USD is shaking out in Asia trading, declining from a session high of 1.3912 to trade into the 1.3880 region ahead of European markets. Markets are beginning to go squirrely as the US CPI data looks set to kick off the trading week officially after sedentary market conditions in Monday's session. 

The Sterling is declining into Tuesday's macro data window, with the UK's Budget Report dropping at 11:30 GMT, quickly followed by the US CPI figures at 12:30. The Budget Report will provide markets with updated GDP and economic activity forecasts for the fiscal year heading into Brexit. Ongoing Brexit concerns have been a drag on the GBP lately, but with the possibility of an EU-UK deal being announced at the end of the month, traders and UK business operators alike are hopeful that Brexit, which begins next March, won't be as much of an opaque mess as it has seemed recently. 

Markets are hunkering down in anticipation of the US inflation figures; inflation fears were temporarily sated last Friday when the jobs report that added 313k new jobs to the American workforce also showed slack in real wage growth, implying that inflation may not be surging as much as many have expected. That calm has eroded while looking down the barrel of CPI figures due today, and traders are beginning to balk at the prospect of a positive beat to the headline number (forecast at 2.2% for the year-on-year vs the previous 2.1%) reigniting inflation fears and taking risk-based assets lower once again in a mini-repeat of January's collapse.

GBP/USD Technicals

The pair is still holding in bullish territory but grasping. The GBP/USD has been nailed to the 34 EMA for most of March's trading, and H4 charts show a potential ceiling at resistance from last week's high of 1.3930, with the previous week's swing high of 1.4070 further out. Support is thin but priced in at the last two swing lows, 1.3780 and 1.3710 respectively.