Key Moments
- GBP/USD trades around 1.3435 in Thursday’s Asian session, showing little directional bias.
- UK headline CPI slowed to 2.8% YoY in April from 3.3% in March, undershooting the 3.0% forecast, with core CPI dropping to 2.5%.
- Geopolitical tensions linked to US-Iran negotiations and shifting BoE rate expectations weigh on the outlook for the British Pound.
GBP/USD Steady in Asia as Markets Digest UK Data
The GBP/USD pair is trading largely unchanged near 1.3435 during the Asian session on Thursday. The lack of movement comes as investors absorb a marked cooling in UK inflation alongside uncertainty surrounding US-Iran negotiations, factors that may constrain upside for the British Pound against the US Dollar.
Market participants are also looking ahead to preliminary Purchasing Managers’ Index (PMI) readings for May from both the United Kingdom and the United States, which are scheduled for release later on Thursday.
UK Inflation Slows More Than Expected
Data from the Office for National Statistics (ONS) on Wednesday showed that UK headline Consumer Price Index (CPI) inflation eased to 2.8% year-over-year in April, down from 3.3% in March. This outcome fell short of the anticipated 3.0% reading.
Core CPI, which excludes food and energy, increased 2.5% year-over-year in April, compared with 3.1% previously and below the market expectation of 2.6%.
| Indicator | Period | Actual | Previous | Forecast |
|---|---|---|---|---|
| UK Headline CPI (YoY) | April | 2.8% | 3.3% | 3.0% |
| UK Core CPI (YoY) | April | 2.5% | 3.1% | 2.6% |
The inflation report, together with an unexpected increase in the Unemployment Rate to 5.0%, has led traders to reassess the path of Bank of England (BoE) policy tightening by December. According to Reuters, UK rate futures are now pricing in around 52 basis points of additional BoE tightening by December, compared with approximately 60 basis points on Tuesday.
US-Iran Tensions Support the Dollar
US President Donald Trump said on Wednesday that negotiations with Iran were in the final stages, while warning of further attacks unless Iran agrees to a deal. Meanwhile, Iranian President Masoud Pezeshkian stated that Tehran was not on the brink of giving in and threatened to retaliate for any strikes with attacks beyond the Middle East.
Persistent geopolitical tensions between the United States and Iran could underpin the US Dollar and limit gains for GBP/USD over the near term.
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