US Dollar Steadies Ahead of CPI Release Amid Market Uncertainty

Ahead of Thursday's US CPI release, the US dollar has remained steady after dropping last week due to mostly weaker US economic data. The dollar's weakness sent GBP/USD above the 1.28 mark, positioning the currency pair for a significant week.

The upcoming US inflation data release could impact the odds of a September rate cut, drawing attention to GBP/USD, which recently broke through a major long-term resistance trend. This week could reveal a clearer trend for the US dollar, coinciding with important UK data releases, making GBP/USD a key pair to watch.

In the UK, the monthly GDP estimate for May will be released on Thursday. Expected to show 0.2% growth month-on-month after a flat April, this data could boost the pound if it beats expectations, particularly given the positive reaction to Keir Starmer's first week as UK Prime Minister.

With no major US data releases today, Jerome Powell's second day of testimony will be the main macro event. The week's highlight is the US CPI data release on Thursday, which could spark volatility in the FX market. The US dollar will be in focus with CPI, PPI, and the University of Michigan's consumer sentiment and inflation expectations surveys due this week.

Last week's US data largely disappointed, including a nonfarm payrolls report showing a 206,000 increase in jobs but with revisions lowering the three-month average to its lowest since January 2021. Unemployment rose to 4.1%, and average hourly earnings grew at their slowest rate since Q2 2021, supporting the Fed's 2% inflation target.

Key US data and Fed members' speeches this week could impact GBP/USD. With upcoming CPI and PPI data, a clearer trend for the US dollar might emerge in the latter half of the week. The latest CPI data, to be released on Thursday, July 11, will be crucial. A weak CPI print could indicate that disinflation is back on track, aiding the move towards normal inflation levels.