GBP/USD drifts higher ahead of late-week run of UK and US data

• GBP caught a mild bid amid USD weakness, approaching 1.3400.
• Trade sentiment continues to dominate market attention as traders hope for tariff clarity.
• UK CPI inflation due Wednesday, UK and US PMI double header due on Thursday.

GBP/USD rose slightly on Tuesday, climbing toward (but still not able to capture) the 1.3400 handle. Cable is heading into a run of key inflation and business outlook data releases, with UK Consumer Price Index (CPI) inflation slated for Wednesday, with a double-bang of UK and US Purchasing Managers Index (PMI) survey results due on Thursday.

Trade headlines remain the key driver for global markets this week. Investors remain hopeful that deals will be struck with the US that will encourage the Trump administration to take the tariff gun away from its own economy's head, but the steady drift into the unknown is beginning to limit bullish sentiment. The Trump administration is rapidly approaching its own self-imposed 90-day deadline on its own "reciprocal tariffs" package. While some potential trade deals have been announced, nothing concrete has been forthcoming.

UK CPI inflation for April will print early Wednesday. Median market forecasts are calling for a jump in monthly CPI to 1.1% MoM from the previous 0.3%. Annualized CPI is also expected to rise, forecast to print at 3.3% from 2.6%. Core UK CPI inflation is also expected to tick higher, expected to climb to 3.6% YoY from 3.4%.

Thursday will bring a double-header PMI release for both the UK and the US. Markets are expecting a broad uptick in indexed forward-looking business survey results, while US figures are expected to come in mixed. US Manufacturing PMI in May is expected to tick down to 50.1 from 50.2, while the Services component is seen holding flat at 50.8.

GBP/USD price forecast

Cable remains capped by the 1.3400 for the time being, however bullish momentum has remained stubbornly determined, albeit slow-moving. GBP/USD broke out of near-term consolidation this week, but the pair could be poised for a downside correction back into congestion as technical oscillators begin to flash overbought warning signs.

GBP/USD daily chart