Soft US inflation data fails to curb Fed rate hike bets as oil prices and geopolitical risks lift the USD.
The GBP/USD pair retreated to around 1.3525 in early European trading Thursday, paring some of Wednesday’s gains to a two-month high near 1.3560. Selling pressure emerged as investors reassessed this week’s softer US CPI and PPI reports amid rising crude oil prices and escalating US-Iran tensions, which bolstered the safe-haven USD.
The pair had climbed above the 1.3500 mark after breaking through the 61.8% Fibonacci retracement level of its May-June decline, reinforcing a bullish technical outlook. However, renewed Fed rate hike expectations and geopolitical risks weighed on sentiment, offsetting support for the GBP from easing UK political uncertainty and optimism over fiscal discipline under incoming Prime Minister Andy Burnham.
Technical indicators suggest dip-buying remains favored on pullbacks below 1.3500, though near-term volatility persists as markets balance inflation concerns against policy outlooks.