The GBP/USD pair trades modestly flat near the 1.2450 mark in the European session on Wednesday. After reversing its early gains, the pair has settled into a relatively stable position. The anticipated release of the US inflation report later in the day is generating significant attention, with traders keen to see how the numbers play out.
Softer-than-expected inflation figures could help assuage concerns over rising prices, potentially leading to a retreat in the US dollar. This scenario might pave the way for further advances by major currencies against the greenback. Conversely, stronger-than-expected inflation data could heighten economic anxieties and dampen risk appetite among investors.
Gold prices have experienced selling pressure for a second consecutive day, influenced by a modest uptick in the USD. Meanwhile, US President Trump's proposal for reciprocal tariffs through executive action has lent support to the dollar, keeping it buoyant in the global market.
Economists predict that the Consumer Price Index (CPI) will show an annual increase of 2.9% for January, while core inflation is expected to hover above the Federal Reserve's target at 3.1% year-on-year. A stronger set of inflation numbers could heighten inflationary concerns and weigh heavily on market sentiment.
Despite these concerns, global stock markets appeared to shrug off tariff-related fears earlier this week. However, investor caution persists, as evidenced by expectations for a lower opening for both the S&P 500 and the Eurostoxx 50 index today.