GBP/USD: Sterling steady after UK inflation miss, eyes retail data

The pound treaded water Thursday after slipping Wednesday when UK inflation undershot forecasts. Consumer prices held at a 4.0% annual rate in January, unchanged from December and below economists’ 4.2% estimate. Sterling fell 0.2% against the dollar to $1.2565.

Bulls now look ahead to Friday’s UK retail sales data for January, seen rebounding 1.5% after December’s 3.2% dive. A bigger-than-expected recovery could lift sterling by supporting hawks opposed to Bank of England rate cuts before August.

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The pound’s retail respite comes after GDP data showed the UK entered a technical recession in H2 2023. Sterling fell Wednesday as the economy shrank 0.3% in Q4, worse than expected, after a 0.1% Q3 contraction.

Near-term sterling may remain under pressure amid recessionary winds. GBP/USD traded at $1.2557 Thursday morning before U.S. data that could spur further declines.