Pound Sterling Wavers Near 1.3430 as US CPI and Trade Tensions Stir Market Caution

Pound Sterling Wavers Near 1.3430 as US CPI and Trade Tensions Stir Market Caution

The Pound Sterling (GBP) is under pressure, trading near 1.3430 against the US Dollar (USD) on Tuesday. As the market awaits the latest US and UK inflation reports for June, traders are reluctant to take bold positions amid broader economic uncertainty and geopolitical friction.

US CPI Report in Focus as Fed Watches Inflation Closely

The upcoming release of June's US Consumer Price Index (CPI) at 12:30 GMT is expected to offer crucial insight into how recent tariff threats are influencing inflationary pressures. The US Dollar Index (DXY), which had been hovering near a three-week high of 98.00, has softened slightly in early trading.

"Markets are pricing in increased inflation risk due to tariffs," noted one analyst, suggesting that a hot CPI print could cause a hawkish shift in Fed policy expectations.

Federal Reserve policymakers have been consistent in their wait-and-see approach, emphasizing the need for clearer inflation signals before committing to interest rate changes.

UK CPI Seen Rising Steadily, But Overshadowed by US Data

While the UK CPI is also due this week and expected to rise at a stable pace, the focus remains firmly on the US inflation data, given its global influence and implications for Federal Reserve interest rate policy.

Persistent Trade Tensions Cloud Market Sentiment

US President Donald Trump's latest retaliatory tariff threats against 22 countries, including the EU, Japan, South Korea, and Canada, continue to weigh on risk sentiment. Analysts suggest that while June CPI may partially reflect pricing pressure, the full impact of tariffs will likely show up in July and August’s inflation data.

Also Read on Tredu.com:

• How CPI Shapes Fed Policy: Inflation Guide for Traders
• Trump’s Tariff Spree: What It Means for GBP/USD
• DXY Technical Outlook: Can the Dollar Maintain Momentum?