GBP/USD retreats from 1.2700 as investors brace for the US CPI release

• Sterling’s recovery falters at the 1.6680-1.6700 resistance area.
• An increasing risk aversion ahead of the US CPI release is supporting the USD.
• The broader trend remains negative while below 1.6680

The Pound has found some supply at levels right above the 1.2700 area before pulling back with investors cutting back short USD positions ahead of the US inflation release. The pair, however, remains moderately positive for the second consecutive day.

US CPI to set the Dollar’s near-term direction

All eyes are on the US Consumer Prices Index data, due on Wednesday, which is expected to confirm that price pressures remain steady well above the Fed’s target rate.

The USD risk is skewed to the upside, as recent US data has endorsed a “no landing” scenario, that would be confirmed in case of another upside surprise on inflation. Recent hints on wage growth and industrial prices are pointing to resilient inflation.

The technical picture shows the Pound under an increasing momentum, although the failure to confirm above the 1.6680-1.6700 area leaves the broader bearish trend intact. On the downside, supports are 1.6575 and 1.6535.