GBP/USD remains sidelined above 1.2930 mark, cooling inflation in the UK

• GBP/USD remains sidelined around 1.2935 after diving to a weekly low below the 1.2900 area.
• UK’s June CPI revealed an easing in inflationary pressures.
• The US Dollar rebounds to five-day highs despite disappointing US housing data.

The GBP/USD pair licks its wounds around 1.2935 in the early Asian session after diving to a weekly low near the 1.2870 region. The major declines after the publication of the softer UK Consumer Price Index.

The Office for National Statistics in the United Kingdom reported that the headline Consumer Price Index (CPI) MoM increased by 0.1% in June, below the 0.4% expected and the 0.9% increase in May. Annually, headline CPI fell to 7.9%, falling short of the expectation of 8.2% and the 8.7% increase in May. The core CPI figure, excluding volatile food and oil prices, fell to 6.9%, against the market consensus of 7.1%. This softer inflation data could help the Bank of England (BoE) to hike rates towards 25 basis points (bps) rather than 50 bps in the next policy meeting on August 3.

Across the pond, US Housing Starts fell 8% MoM in June, following a 15.7% gain (revised from +21.7%) in May. This number was below the market consensus of a 7.2% increase. Meanwhile, Building permits declined 3.7% in June from 5.6% prior (revised).

Although the US Dollar rebounds to five-day highs and hovered around 100.25 on Thursday despite the disappointing US housing data. Market players anticipate that the Federal Reserve (Fed) is nearing the end of its policy tightening cycle and will maintain interest rates following the widely expected 25 basis points (bps) in the July meeting.

Moving on, investors will watch the US Existing Home Sales and the UK Retail Sales for fresh impetus. Next week, the focus will shift to the Flash Manufacturing Purchasing Managers Index (PMI) and Flash Services PMI from the US and UK. These figures would significantly impact the pair and help determine the next direction for the GBP/USD pair.