Sterling Pressured Ahead of UK Inflation, Fed Minutes

Key Moments

GBP/USD Holds Weak Tone Ahead of Key Macro Releases

The GBP/USD pair is struggling to extend its late rebound from an over one-week trough below the 1.3500 psychological level and is trading with a downside bias for the third consecutive session on Wednesday. Despite this, selling pressure appears contained as market participants avoid taking strong positions before the latest UK consumer inflation figures and the Federal Open Market Committee (FOMC) Minutes are published.

A weaker-than-expected UK jobs report on Tuesday strengthened expectations that the Bank of England (BoE) could move toward a rate cut in March, continuing to drag on the British Pound (GBP). At the same time, a modest rise in the US Dollar (USD) during the Asian session is acting as an additional headwind for GBP/USD. However, expectations for a dovish Federal Reserve (Fed) stance may curb further USD appreciation and help limit deeper losses in the pair.

Technical Picture: 200-Period SMA Acts as a Key Barrier

The pair’s overnight slide below the 200-period Simple Moving Average (SMA) on the 4-hour chart has been viewed as an important bearish signal for GBP/USD sellers. The Moving Average Convergence Divergence (MACD) indicator shows its histogram in negative territory but narrowing, pointing to the MACD line remaining below the Signal line, with both fluctuating around the zero mark. The Relative Strength Index (RSI) stands at 39, reflecting a bearish configuration while recovering from oversold levels.

Although the 200-period SMA is gently rising, GBP/USD is struggling to push decisively above this dynamic resistance area. The near-term outlook stays tilted to the downside as long as spot prices are capped beneath this moving average. A clear break higher would likely improve momentum, whereas another failure at this barrier could encourage sellers to maintain pressure on the downside.

Focus on UK Core CPI: Key Inflation Gauge for the BoE

The United Kingdom (UK) Core Consumer Price Index (CPI), released monthly by the Office for National Statistics, measures the rate at which prices of goods and services purchased by households are rising or falling, in line with international standards. The year-on-year (YoY) figure compares prices in the reference month with those from the same month a year earlier. Core CPI excludes the more volatile categories of food, energy, alcohol and tobacco, and is closely watched as an indicator of underlying inflation and shifts in consumer purchasing behavior.

A stronger Core CPI reading is generally interpreted as supportive for the Pound Sterling (GBP), while a weaker outcome tends to be viewed as negative for the currency.

UK Core CPI Release Details

Why Core CPI Matters for Traders

The Bank of England is mandated to keep inflation, measured by the headline Consumer Price Index (CPI), close to 2%. This objective gives each monthly CPI release considerable significance for financial markets. Rising inflation can signal a quicker or more pronounced increase in interest rates or a reduction in bond purchases by the BoE, tightening the supply of Pounds. Conversely, a slowdown in price growth points toward looser monetary conditions. A Core CPI result that exceeds expectations is typically seen as GBP bullish, while a weaker-than-expected number is generally viewed as GBP bearish.