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Will GBP/USD Weaken on Sticky US Core Inflation?

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Pound US Dollar (GBP/USD) Exchange Rate Stumbles Ahead of US CPI Data

The Pound US Dollar (GBP/USD) exchange rate is edging lower this morning, as markets await the release of the latest American CPI data.

At the time of writing, GBP/USD is trading at around US$1.2424, trending marginally below the morning’s opening rates.

US Dollar (USD) to Strengthen amid Core Inflation Uptick?

The US Dollar (USD) is likely to see movement this afternoon, following the release of the latest inflation data. March’s headline CPI rate is forecast to cool from 6% to 5.2%, but core inflation is forecast to tick upward to 5.6%.

If this data prints in line with forecasts, the ‘Greenback’ could strengthen as pressure builds on the Federal Reserve to curtail inflation. Core inflation remaining elevated could increase this, and lead the Fed to consider further interest rate hikes.

This could then be reinforced this evening by the release of the latest FOMC meeting minutes. If these minutes hint at further hikes, USD could strengthen as investors increase their bets on further rate hikes.

Tomorrow, the latest US PPI data is due to print. With price inflation forecast to have stalled over March, this may weigh on the US Dollar as investors adjust their expectations of further tightening.

Pound (GBP) to Rally amid BoE Governor Bailey Speech?

Looking ahead for the Pound (GBP), this afternoon and evening brings a duo of speeches from Bank of England (BoE) Governor Andrew Bailey. With the BoE’s forward guidance currently under scrutiny, investors may be hopeful of any indication of future rate hikes.

However, some economists have begun to suspect a pause from the BoE at their next meeting. If Governor Bailey hints at this, GBP could weaken as investors pare back their rate hike bets.

Tomorrow, the latest GDP data for the UK is due to print. Economists have forecast an expansion of 0.1% in the UK economy during February which could bring strength to Sterling. However, the slowdown expected may limit any gains to be made from the release.

Following this, BoE Chief Economist Huw Pill is scheduled to speak. If he takes a hawkish stance towards inflation and offers a hint towards further hikes, GBP could strengthen.

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