GBP extends upside on weaker dollar

The GBPUSD pair extended its upside near 1.2688 during early Asian trading on Thursday, supported by a weaker Greenback after the release of softer US CPI inflation data.

Later in the day, the US Building Permits, Housing Starts, the weekly Initial Jobless Claims, the Philly Fed Manufacturing Index, and Industrial Production will be released.

Also, the Federal Reserve’s Barr, Harker, Mester and Bostic are set to speak on Thursday.

Inflation in the United States eased slightly in April. The Consumer Price Index (CPI) rose 3.4% on a yearly basis in April, compared to an increase of 3.5% in March, according to the Bureau of Labor Statistics on Wednesday.

The annual core CPI inflation eased to 3.6% YoY in April from 3.8% in the previous reading. Both figures came in line with the estimation.

On a monthly basis, the CPI and the core CPI both rose 0.3% MoM in April. The softer inflation data raised the odds for a Fed rate cut in 2024, dragging the dollar lower and creating a tailwind for the GBPUSD pair.

Furthermore, the final reading of Retail Sales showed no change in April from the previous reading of a 3% increase, worse than the market expectation of 0.4%.

On the sterling front, the UK employment data showed job market conditions deteriorated for the third consecutive month as the Unemployment Rate rose.

Nonetheless, Bank of England policymakers remain concerned over high service inflation as it could stall progress in the disinflation process. This prompted uncertainty over the BoE interest rate cuts.

(Source: OANDA)