GBP/USD rises as traders await US CPI report, which may influence Federal Reserve rate expectations and USD strength.
The GBP/USD pair advanced to 1.3390 in early European trading on Wednesday, supported by anticipation of the US May Consumer Price Index report. The data could shape expectations for Federal Reserve policy, with hotter-than-expected inflation potentially boosting the USD against the GBP.
Markets had previously expected the Bank of England to cut rates twice this year to 3.35%, but geopolitical tensions and shifting projections now suggest a possible 25 basis points hike before December. UK GDP data due Friday may further influence sentiment.
Renewed Middle East tensions, including US retaliatory strikes against Iran, could limit the GBP’s upside as risk appetite wanes. Traders remain cautious ahead of the CPI release, which may dictate near-term currency movements.