GBP/USD sticks to gains above 1.1700 mark, sits near two-week high ahead of US CPI

• GBP/USD gains traction for the third straight day and climbs to a nearly two-week high.
• The prevalent USD selling bias and the upbeat UK employment data remain supportive.
• The uptick lacks bullish conviction as traders now await the release of the US CPI report.

The GBP/USD pair builds on its recent recovery move from the lowest level since 1985 and gains traction for the third successive day on Tuesday. The momentum lifts the pair to a nearly two-week high, around the 1.1730-1.1735 region during the first half of the European session and is sponsored by sustained selling around the US dollar.

The US dollar remains depressed near the monthly low touched the previous day amid signs of a sustained decline in US inflation. In fact, a survey released by the Federal Reserve Bank of New York on Monday showed that consumer expectations for US inflation over the coming years declined sharply to the lowest level since October 2021. This, along with a modest downtick in the US Treasury bond yields and a generally positive risk tone, weighs on the greenback and acts as a tailwind for the GBP/USD pair.

The British pound is further underpinned by mostly upbeat UK employment figures, showing that the jobless rate fell to the lowest level since 1975 and came in at 3.6% during the three months to July. Adding to this,  average weekly earnings surpassed expectations and raised the risk of wage inflation. This might force the Bank of England to tighten its monetary policy at a faster pace, which is seen as another factor that impressed bullish traders and provided an additional lift to the GBP/USD pair.

The intraday positive move, however, lacks strong follow-through buying amid some nervousness ahead of the US consumer inflation figures, due for release later during the early North American session. The crucial US CPI report will play a key role in influencing the Fed's policy outlook and dictate the near-term trajectory for the greenback. This, in turn, should allow traders to grab short-term opportunities around the GBP/USD pair ahead of the UK consumer inflation figures on Wednesday.

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