GBPUSD recoups recent losses ahead of UK CPI.
GBPUSD retraces its previous session gains, trading down around 1.2200 during the Asian session on Tuesday. The pair is consolidating, probably due to market uncertainty over the direction of the US Federal Reserve’s (Fed) monetary policies.
The Rightmove House Price Index (MoM) jumped to 0.5% in October from 0.4% the previous month, according to data released on Monday. The annual statistics indicated that residential property values fell by 0.8%, compared to a 0.4% drop the previous year. The yearly number for the UK Consumer Price Index (CPI) is expected to fall from 6.7% to 6.5%. Core CPI is estimated to be 6%, down from 6.2% in September. Despite this decrease in yearly numbers, a significant increase in the monthly CPI is expected, going from 0.3% to 0.4%.
Monthly inflation might feed anticipation of another interest rate rise by the Bank of England.
An increase in monthly inflation might fuel speculation about another interest rate hike by the Bank of England (BoE). Currently, the BoE’s interest rate probability remains at a 50% possibility of a 25 basis point raise this cycle.
The US dollar is under pressure as a result of dovish statements from many Federal Reserve members.
At the time of writing, the US Dollar Index (DXY) was trading slightly higher at 106.30, attempting to retrace recent losses. Nonetheless, US Dollar (USD) was under pressure due to dovish statements from several Federal Reserve officials, who indicated that no additional interest rate rises are likely for the duration of 2023. The dovish posture reflects the central bank’s cautious approach, emphasizing a reluctance to tighten monetary policy in the current economic environment.
President Patrick Harker of the Federal Reserve Bank of Philadelphia echoed this stance on Monday, advising that the central bank avoid generating additional economic pressures by raising borrowing costs. Harker also stated that the Fed should keep interest rates at their current levels unless there is a dramatic shift in the data.
US Treasury rates are recovering from recent dips. as a potential aspect that might lend support to the US Dollar. By press time, the 10-year US Treasury bond yield was 4.73%.
Despite escalating geopolitical tensions between Israel and Palestine, the USD continues to profit from safe-haven flows. During times of increased uncertainty and geopolitical danger, safe-haven currencies, such as the US dollar, tend to draw demand.
GBPUSD investors will most likely be watching US Retail Sales and the Fed Beige Book release on Tuesday.
