Title: GBP/USD turns sideways around 1.2080 as investors await US Inflation release

August 10, 2022 01:08 AM ET

By: AnalysisWatch

The GBP/USD is trading in a range of 1.2079-1.2085 after a slight recovery from a low of 1.2070. Investors have preferred to stay on the sidelines ahead of the US Consumer Price Index (CPI) data, which is expected to surprise market participants this time.

The investment community is aware that rising oil prices continue to be the main driver of price pressures. Firm supply concerns and a gloomy outlook for oil demand have led to a steeper decline in oil prices. The multiplier effect will be felt in the inflation rate.

Market participants' estimates point to a decent decline of 40 basis points (bps) in the pure inflation rate to 8.7% from the previous release. In contrast, the core inflation rate, which excludes oil and food prices, is expected to rise to 6.1% from 5.9% previously.

For the Federal Reserve (Fed) to remain calm and maintain a neutral stance, a series of declines in cost-driving inflation is desirable. A one-time slowdown in price pressures will not be enough to end the journey toward the neutral rate. Exhaustion signals, however, would please Fed policymakers.

In the UK, gross domestic product (GDP) is expected to land at -0.2%, down from 0.8% in the previous release. And annual data points to a decline of 2.8% from the previous release. Estimates for manufacturing production data also do not paint a rosy picture. The economic data is likely to fall to 1.3% from 2.3% previously. This could keep the bulls on the back foot