GBP/USD slides despite cooling US inflation, eyes on US PPI

• US inflation eases to 3.1% YoY (core), boosting Fed rate-cut expectations.
• 25% tariffs remain a risk factor; further UK rate cuts could cap Sterling's gains.
• Traders look toward US PPI on Thursday and UK GDP release for direction.

The Pound Sterling depreciated against the US Dollar on Wednesday as US inflation data revealed the disinflation process continued. At the time of writing, the GBP/USD trades at 1.2925, down 0.13%.

Sterling dips to 1.2925 amid cautious market reaction to US CPI report

In February, the US Consumer Price Index (CPI) was below the estimated 0.3% and rose by 0.2% MoM. On a yearly basis, CPI dipped from 3% to 2.8%. Excluding volatile items, the so-called Core CPI expanded by 0.2% MoM, down from 0.4% in January, beneath forecast, and in the twelve months to February, slid from 3.3% to 3.1%.

The GBP/USD spiked on the data release but retreated to 1.2920 as traders digested the news.

Although the data was positive, fears of an inflation reacceleration loom due to tariffs imposed on goods imported to the US. Today, 25% tariffs on aluminum and steel are in effect, with no exceptions.

Money market futures traders had been priced in 74 basis points of easing by the Federal Reserve (Fed) toward the end of the year. Hence, further GBP/USD upside is seen unless the Bank of England (BoE) cuts rates more aggressively than the Fed or next month’s CPI data comes hotter than today’s, which would put downward pressure on the pair.

The US economic docket will feature the Producer Price Index (PPI) for the same period as today’s CPI and Initial Jobless Claims data. Traders brace for Gross Domestic Product (GDP) figures in the UK on Friday.

GBP/USD Price Forecast: Technical outlook

GBP/USD is set to continue its uptrend despite today’s dip on US inflation data. The Relative Strength Index (RSI) shows that buyers are taking a respite, as the RSI is overbought. If the pair clears 1.2950, the next resistance would be 1.3000. Once surpassed, the next stop would be November’s 6 high at 1.3047. However, if GBP/USD turns downward and clears 1.2900, a test of the 200-day Simple Moving Average (SMA) at 1.2790 is on the cards.