Pound Sterling treads water above 1.3500 ahead UK CPI data

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GBP/USD remains flat after registering modest losses in the previous trading day, hovering around 1.3510 during the Asian hours on Wednesday.

GBP/USD steadies after Trump extends Iran ceasefire until negotiations make progress.
US Vice President Vance canceled his Islamabad trip after Iran declined participation.
Markets expect UK headline inflation to rise to 3.3% YoY from 3.0%, while Core CPI holds at 3.2% in March.

GBP/USD remains flat after registering modest losses in the previous trading day, hovering around 1.3510 during the Asian hours on Wednesday. The pair moves little as the US Dollar (USD) maintains its position after Bloomberg reported that US President Donald Trump will extend the ceasefire with Iran until negotiations between the two sides make progress.

Reports indicated that Vice President JD Vance canceled a planned visit to Islamabad for negotiations after Tehran informed Washington via Pakistan that it would not attend the meeting.

However, uncertainty surrounding the US-Iran peace talks prevails. Trump said earlier, “I expect to be bombing” if Iran failed to meet his demands, adding the military was “raring to go.” Moreover, the US blockade on Iranian vessels remains in place as plans for a second round of US-Iran peace talks collapsed. Iran's military warned of a powerful attack on predetermined targets in view of repeated threats by US President Donald Trump.

The Greenback gained support against its major peers following stronger-than-expected US Retail Sales data released on Tuesday. The US Census Bureau reported that Retail Sales increased 1.7% month-over-month (MoM) in March, compared to the 0.7% rise (revised from 0.6%) recorded in February. The figure exceeded market expectations of 1.4%. On a YoY basis, Retail Sales rose 4.0% in March, matching February’s reading.

In the United Kingdom (UK), Tuesday’s employment data delivered a mixed picture for March. The ILO Unemployment Rate declined to 4.9%, beating the 5.2% consensus. However, the Claimant Count rose by 26.8K, exceeding the 21.4K forecast, while the 3M Employment Change slowed to 25K from 84K previously.

Attention now turns to Wednesday’s March Consumer Price Index (CPI) release, where headline inflation is expected to rise to 3.3% YoY from 3.0%, while the Core CPI is projected to remain steady at 3.2%.

Economic Indicator

Consumer Price Index (YoY)

The United Kingdom (UK) Consumer Price Index (CPI), released by the Office for National Statistics on a monthly basis, is a measure of consumer price inflation – the rate at which the prices of goods and services bought by households rise or fall – produced to international standards. It is the inflation measure used in the government’s target. The YoY reading compares prices in the reference month to a year earlier. Generally, a high reading is seen as bullish for the Pound Sterling (GBP), while a low reading is seen as bearish.

Why it matters to traders?

The Bank of England is tasked with keeping inflation, as measured by the headline Consumer Price Index (CPI) at around 2%, giving the monthly release its importance. An increase in inflation implies a quicker and sooner increase of interest rates or the reduction of bond-buying by the BOE, which means squeezing the supply of pounds. Conversely, a drop in the pace of price rises indicates looser monetary policy. A higher-than-expected result tends to be GBP bullish.