• The GBP/USD price analysis remains firm after UK CPI reports a mild rebound to 3.4% against the expected 3.3%.
• Sticky inflation fades the odds of the BoE easing soon as the figures lie well above the 2% target.
• Markets await UK retail sales, PMIs, and US inflation and GDP data this week.

GBP/USD is trading in a firmer tone after the latest UK CPI report, with the data tilting short-term risks slightly in favor of the pound. Headline inflation accelerated to 3.4% year?on?year in December from 3.2%, beating expectations of 3.3%. On a monthly basis, prices rose 0.4% after a 0.2% fall in November, exactly in line with forecasts. Core CPI held at 3.2%, still well above the Bank of England’s 2% target. In simple terms, inflation is no longer easing as smoothly as the BoE would like.

For GBP/USD, this matters because it challenges the market’s more dovish assumptions on BoE policy. Before the release, softer labor data and signs of a cooling economy had encouraged talk of earlier and deeper rate cuts. The hotter-than-expected headline CPI print now complicates that narrative. It keeps alive the risk that the BoE has to stay restrictive for longer, or at least cut more cautiously, which is generally supportive for the pound relative to the US dollar.

However, this isn’t Sterling’s best news. The economy remains stressed, with wage growth stagnating and activity indicators falling. The BoE is caught between high inflation and poor growth. Markets may delay cuts after the CPI data rather than raise prices in expectation of more hikes. GBP/USD is more likely to trade in a range than to rise straight up.

Against the dollar, the pair remains heavily driven by relative policy expectations. If US data continue to soften and the Federal Reserve edges closer to rate cuts, while the BoE remains cautious due to stubborn inflation, GBP/USD could grind higher within its recent range. Conversely, any downside surprise in future UK inflation prints would quickly reignite talk of earlier BoE easing and put the pound back under pressure. Looking ahead, markets will be eyeing UK retail sales, PMIs, and US GDP and Core PCE data.
 

GBP/USD Technical Price Analysis: Neutral Between 50, 100 MAs
 

(Click on image to enlarge)

GBP/USD 4-hour chart
 

The GBP/USD 4-hour chart shows consolidation under 1.3450, wobbling between 50- and 100-period MAs. Earlier, the price found strong rejection at 1.3490 on Tuesday, paring the pre-London session gains. However, the price remains supported by the confluence of 20- and 200-period MAs near 1.3400.

The RSI remains flat above 50.0, suggesting a fading momentum. The pair is looking for a catalyst to break out of consolidation. The upside target lies at 1.3500 while the downside could find interim support near 1.3400 ahead of 1.3360.

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