GBP/USD stabilizes ahead of key central bank decisions, UK’s inflation in focus

• GBP/USD hold steady as BoE, Fed decisions loom.
• US homebuilders' confidence rises, mortgage rates may drop if Fed eases.
• UK inflation data pivotal for Sterling pre-BoE decision.
• The GBP/USD is under pressure as unexpected UK CPI may alter BoE policy.

The Pound Sterling losses steam and treads water against the US Dollar as traders prepare for the announcement of major central banks' monetary policy decisions. The Bank of England and the US Federal Reserve are expected to hold rates unchanged, though a ‘hawkish tilt’ of the Fed might weigh on Sterling; the GBP/USD trades at 1.2727, barely down 0.04%.

Sterling awaits Fed and BoE decisions, as UK inflation could set the tone

This week, the US economic docket will feature housing data on the first two days of the week. Data from the National Association of Home Builders (NAHB) revealed that homebuilders' confidence rose in March to its highest level since July 2023, as mortgage rates dip, on expectations that the Fed might begin to ease policy. The NAHB Market Index came at 51, up from 48 in February.

Across the pond, UK inflation is due on Wednesday, a day ahead of the BoE’s decision. The Consumer Price Index (CPI) for February is expected to dip from 4% to 3.5% YoY, while core figures are estimated at 4.6% YoY, down from 5.1%.

If UK inflation cools as estimated, that could be negative for Cable, which would likely be under pressure later on Wednesday as the Fed announced its decision and updated its projections. The data could influence Thursday’s BoE decision and tilt the UK’s central bank slightly dovish.

On the other hand, a hotter-than-expected inflation in Britain could underpin the GBP/USD higher, as the BoE would adhere to the mantra of keeping rates “higher for longer.”

GBP/USD Price Analysis: Technical outlook

Since reaching the current year-to-date (YTD) high of 1.2894, the GBP/USD has dived more than 1.30%. if sellers push prices below 1.2700, that could open the door to challenge dynamic support at the 50-day moving average (DMA)  at 1.2685. further downside is seen once cleared, at the 100-DMA at 1.2607, followed by the 200-DMA at 1.2590. On the flip side, if buyers lift the exchange rate above last Friday’s high of 1.2758, further upside is seen at 1.2800.