Pound Sterling wobbles against US Dollar as focus shifts to US inflation

• The Pound Sterling trades sideways around 1.3350 against the US Dollar as focus shifts to the US inflation data.
• BoE dovish bets accelerate as the inflation growth appears to have peaked for now.
• The US plans to curb exports of software-powered products to China.

The Pound Sterling (GBP) trades in a tight range around 1.3350 against the US Dollar (USD) during the European trading session on Thursday. The GBP/USD pair consolidates as investors shift focus to the United States (US) Consumer Price Index (CPI) data for September, which will be finally released on Friday after facing some delay due to the government shutdown.

During the press time, the US Dollar Index (DXY), which tracks the Greenback's value against six major currencies, trades 0.2% higher to near 99.10. The DXY rebounds after a corrective move on Wednesday.

The impact of the US inflation data will be significant on the US Dollar, as a majority of economic data releases have been canceled due to the ongoing federal shutdown.

As measured by the CPI, the US headline inflation is expected to have risen at a faster pace of 3.1% YoY in September against the prior release of 2.9%, with core figures growing steadily by 3.1%. On a monthly basis, the headline and core CPI are estimated to have risen by 0.4% and 0.3%, respectively.

Meanwhile, traders remain increasingly confident that the Fed will cut interest rates in both of its remaining monetary policy meetings this year. According to the CME FedWatch tool, traders see a 96% chance that the Fed will cut interest rates by 25 basis points (bps) in both policy meetings, later this month and in December.

Daily digest market movers: Pound Sterling trades mixed against its currency peers

• The Pound Sterling exhibits a mixed performance against its major currency peers on Thursday. However, the outlook for the British currency has become uncertain as traders have raised bets supporting more interest rate cuts by the Bank of England in the remaining year.
• According to a report from Reuters, interest rate futures were pricing a 78% chance that the BoE will cut its Bank Rate by 25bps to 3.75% before the year-end, up from about 46% recorded on early Wednesday.
• BoE dovish bets accelerated after Wednesday's release of the United Kingdom (UK) CPI data for September, which signaled that growth in price pressures is peaking. The BoE stated in its September monetary policy meeting that inflationary pressures would peak around 4% this month.
• According to the UK inflation report, the core CPI - which strips off volatile items - rose at a slower pace of 3.5% against 3.6% in August. Meanwhile, the headline inflation grew at a steady pace of 3.8%.
• Accelerating BoE dovish bets have weighed on short-term UK gilt yields. 10-year yields slide to near 4.37%, the lowest level seen in 10 months.
• Going forward, investors will focus on UK Retail Sales data for September and preliminary S&P Global UK-US Purchasing Managers' Index (PMI) data for October, which will be released on Friday.
• On the global front, trade tensions between the US and China have risen as the US plans to impose restrictions on software-powered exports to China starting November 1, Reuters reported. The report also showed officials from White House warned that the plan could cover a wide range of products because "everything imaginable is made with US software."

Technical Analysis: Pound Sterling consolidates around 1.3350

The Pound Sterling trades inside Wednesday's trading range around 1.3350 against the US Dollar at the time of writing. The near-term trend of the GBP/USD pair remains uncertain as it trades below the 20-day Exponential Moving Average (EMA), which is around 1.3404.

The 14-day Relative Strength Index (RSI) wobbles near 40.00. A fresh bearish momentum would emerge if the RSI drops below that level.

Looking down, the August 1 low of 1.3140 will act as a key support zone. On the upside, the psychological level of 1.3500 will act as a key barrier.