British Pound firms as US CPI countdown tests USD bulls

• US CPI is expected to accelerate, keeping Fed hikes alive.
• Softer ADP hiring tempers Dollar strength before inflation data.
• BoE tightening bets support Sterling ahead of UK GDP.

The Pound Sterling gains 0.31% on Tuesday as the Greenback trims some of its earlier losses, amid risk appetite souring and traders waiting for the release of US inflation figures and tensions in the Middle East, tempered by US President Trump's demand on Israel and Iran. The GBP/USD trades at 1.3384 after bottoming near 1.3330.

GBP/USD rises as traders brace for hotter US inflation

On Wednesday, the US Bureau of Labour Statistics (BLS) is expected to release the Consumer Price Index (CPI) for May, forecast to jump to 4.2% YoY, exceeding the prior month's 3.8% print. Core CPI for the same period is projected to rise from 2.8% to 2.9% YoY.

Even though the data hits the estimates, it’s worth noting that inflation has exceeded the Federal Reserve’s 2% target twice. Consequently, money markets are pricing 23 basis points of rate increases by the US central bank towards the end of the year.

Earlier, the ADP Employment Change 4-week average showed that private hiring dipped from 37.5K to 29K, following last week's stellar Nonfarm Payrolls report, which revealed the addition of over 172K Americans to the workforce.

British Pound boosted as markets expect a BoE rate hike

Cable price action has been driven by the performance of the American currency and expectations that the Bank of England (BoE) could tighten policy by at least 45 basis points, according to Prime Terminal data.

The US Dollar Index (DXY), which measures the performance of the buck against a basket of six currencies, is almost flat at 99.93, capping Sterling’s advance.

BoE official Megan Greene commented last week that she sees a case for hiking rates amid broadening inflationary pressures across the economy due to the Iran war.

Ahead in the week, the UK economic docket will feature April Gross Domestic Product (GDP) figures.

GBP/USD Price Forecast: Technical outlook

In the daily chart, GBP/USD trades at 1.3379, keeping a bearish near-term tone as it holds below the clustered simple moving average around 1.3459 and the broken upward trend-line level at 1.3404, which now act as overhead supply. The Relative Strength Index (14) around 44 leans modestly bearish, suggesting lingering downside pressure while the broader descending trend line from 1.3869, with an interim trigger near 1.3575, continues to cap recovery attempts.

On the topside, initial resistance emerges at the former uptrend support-turned-barrier near 1.3404, followed by the simple moving average zone around 1.3459, with the downtrend break level at 1.3575 and the 1.3869 origin of the resistance line reinforcing a broader supply band higher up. On the downside, structural support is distant, with the key reference coming in near the uptrend origin at 1.3159, leaving the pair vulnerable to further slippage should sellers regain control below the current area.

(The technical analysis of this story was written with the help of an AI tool.)