The GBP/USD currency pair on Tuesday marked a significant rebound, during the early European session, advancing to near 1.3195. The US Dollar pulled back following the U. It was all because of CPI. This report revealed that inflationary pressures continued to cool in April, powering the increase. The market immediately priced in the data, providing a boost to the GBP/USD currency pair. It was last trading 1.3226, having recovered from a low of 1.3165 on the day.
As the pound dollar exchange rate continued to climb within North American trading hours. It even came close to the psychological 1.3250 level against the US Dollar. This movement in the currency pair is a revealing look at the market’s expected reaction to economic indicators. All of these indicators suggest an impending pivot in monetary policy. Yet the most recent CPI report has hijacked those conversations, raising expectations for a potential interest rate cut by the Federal Reserve. Due to the above outcome, the Pound Sterling has rebounded against the US dollar.
The US Dollar Index (DXY), which measures the value of the Greenback against six major currencies, retraced to around 101.40 following its monthly high of approximately 102.00 posted on Monday. The DXY is going down, indicating that the dollar is losing its strength. Faded expectations for higher inflation. Traders are recalibrating with this new softer inflation data.
As you might expect, the housing market reacted very strongly to today’s CPI report. Investors are increasingly confident that inflation in the US is cooling off, and that has led to widespread speculation that the Federal Reserve will begin slashing interest rates in the near future. The soft CPI data has not influenced the currency market but heightened discussions among analysts regarding future monetary policy actions.
Traders and investors have their eyes set on the future. The United Kingdom’s latest employment report, due out later on Tuesday, should provide further indication of the economic picture. As a result, a positive employment report would likely strengthen the Pound Sterling. This would continue to strengthen its bullish trend as of late vs the US Dollar.