GBP/USD oscillates around 1.2150 as focus shifts to US CPI

• GBP/USD is displaying a rangebound action around 1.2150 as investors await US inflation for fresh cues.
• The downward revision of CY2023 global growth projections by the World Bank failed to impact the S&P500 rally.
• The BOE blamed Prudential Regulation Authority for its faulty risk-management systems.

The GBP/USD pair is displaying back-and-forth moves around 1.2150 in the early Tokyo session. Trading activity in the FX domain has turned quiet as investors are looking to make informed decisions post the release of the United States inflation data. The Cable is likely to dance to the tunes of the US Dollar as anxiety among investors ahead of the US Consumer Price Index (CPI) is expected to soar.

Rally in S&P500 futures continued on Tuesday despite the World Bank slashing the CY2023 global growth forecast dramatically to 1.7% from 3% in June's forecast, as reported by Reuters. World Bank forecasts US 2023 Gross Domestic Product (GDP) growth at 0.5% vs. 2.2% in the June forecast, citing it as the weakest non-recession performance since 1970.

The US Dollar Index (DXY) continues its sideways auction below 103.00 as investors have adopted a ‘wait and watch’ approach ahead of the US price index data. Meanwhile, the 10-year US Treasury yields jumped above 3.6% supported by hawkish commentary from Federal Reserve (Fed) Governor Michelle Bowman.

Reuters reported that Bowman said she expects the rate-setting Federal Open Market Committee (FOMC) will continue raising interest rates to tighten monetary policy, as we stated after our December meeting while noting the pace of future actions will be driven by how the economy performs.

On the United Kingdom front, after a year of sheer volatility in the Pound Sterling region that exposed loopholes in lenders’ risk-management system, the Bank of England (BOE) has criticized UK banks’ defenses to dodge volatility.

In a series of letters from the BOE to the Prudential Regulation Authority, BOE stated that “During 2022, the market reaction to Russia’s invasion of Ukraine, and volatility in the nickel and long-dated gilt markets, reinforced the importance of a robust risk culture and sound risk management practices at firms,” However, events like the collapse of Archegos Capital demonstrated firms large and concentrated exposure to single counterparties.