June’s US CPI fell 0.4% month-on-month, the steepest drop since 2020, but GBP/USD gains evaporated within hours amid geopolitical risks.
The British Pound Sterling briefly spiked to near 1.3450 against the US Dollar after June’s Consumer Price Index fell 0.4% month-on-month, the largest decline since April 2020. The annual rate dropped to 3.5% from 4.2% in May, while core CPI printed flat against a 0.2% consensus estimate. Energy prices drove the decline, with gasoline sliding 9.7% following a ceasefire that has since collapsed.
The report marked the softest US inflation print in six years, but GBP/USD gains faded quickly as geopolitical tensions resurfaced. Crude oil prices have rebounded roughly 10% in July after Washington and Tehran resumed hostilities, effectively shutting the Strait of Hormuz. The 200-day Exponential Moving Average near 1.3400 has capped Sterling’s recovery attempts for two weeks, adding technical resistance.
Markets had priced in a dovish shift after a weak 57K US payrolls print earlier in July, but the inflation data’s limited impact suggests traders are reassessing the durability of the disinflation narrative.