The British pound remained steady against the US dollar, with GBP/USD holding near recent highs, as investors turned their focus to upcoming US Consumer Price Index (CPI) data. Markets are looking for signs of whether inflationary pressures are easing, which could influence the Federal Reserve’s interest rate path in the coming months.
The US dollar has been range-bound, with traders hesitant to make aggressive bets ahead of the inflation report. A higher-than-expected CPI reading could reinforce expectations that the Fed will keep rates elevated for longer, boosting demand for the greenback and potentially weighing on the pound. Conversely, weaker inflation data could revive speculation about a sooner-than-expected rate cut, pressuring the dollar and supporting GBP/USD.
GBP/USD 1-D Chart as of February 12th, 2025 (Source: TradingView)
Meanwhile, the Bank of England’s policy stance remains cautious, with policymakers signaling a need to assess further economic data before committing to any rate cuts. While UK inflation has shown signs of cooling, concerns over economic growth have left the pound vulnerable to shifts in market sentiment. Traders are closely watching the BoE’s next move, as any indication of a policy shift could impact the currency’s outlook.
The broader risk environment remains mixed, with equity markets and bond yields reacting to shifting rate expectations. With US inflation still above the Fed’s 2% target, the central bank has been reluctant to signal a definitive policy pivot, keeping markets in a state of uncertainty. This has limited GBP/USD’s upside potential, as the pair remains sensitive to changes in rate differentials.
Looking ahead, market participants will be focused on the US inflation print and any follow-up commentary from Federal Reserve officials. A stronger dollar reaction to CPI data could see GBP/USD retreat from current levels, while a softer reading may provide further support to Sterling.
For now, the pound maintains its footing, with inflation trends and central bank policy outlooks likely to dictate its next major move. Unless economic data surprises significantly, the pair may continue to trade within a narrow range as investors weigh Fed and BoE policy signals.
