GBP/USD gauges cushion above 1.2100 ahead of UK GDP data

• GBP/USD is building a firm cushion around 1.2100 after a sell-off on Thursday.
• An upbeat UK GDP data could avoid recession fears and support the Pound Sterling.
• Fed Barkin warned about the absence of an all-round decline in inflation.

The GBP/USD pair is building a cushion around 1.2110 in the early Tokyo session. The Cable is expected to remain volatile ahead of the release of the United Kingdom's preliminary Gross Domestic Product (GDP) (Q4) data.

The economic data is seen at 0.4% vs. the former release of 1.9% on an annual basis. However, the GDP data could remain flat on a quarterly basis against a contraction of 0.3% disclosed in the third quarter. On a monthly basis, a contraction of 0.3% is expected by the street.

Economists at OCBC Bank cited “UK data dump on Friday is in focus especially after the UK think tank, National Institute of Economic and Social Research (NIESR) predicted that the UK economy is likely to avoid a recession this year. A stronger set of UK data print could validate the think tank's prediction and further unwinding of GBP shorts may well keep GBP supported.”

Apart from that, the commentary from Bank of England (BoE) Governor Andrew Bailey on Thursday kept the Pound Sterling in action. BoE Bailey cited "We expect inflation to come down rapidly this year." He sees the labor market loosening and expects it to show up more in declining vacancies and hours, rather than in higher unemployment."

The market sentiment is quite negative as concerns about further policy tightening by the Federal Reserve (Fed) are still haunting the risk-sensitive currencies. S&P500 futures witnessed downside consecutively for the second day after Richmond Fed President Thomas Barkin raised the question that the inflation slowdown in the United States has been an outcome of a decline in the price of a few goods. An overall decline is yet to be seen, which makes the Consumer Price Index (CPI) heavily stubborn.

Concerns over further interest rate hikes pushed the US Dollar Index (DXY) to near 103.00 after a vertical fall. The yields provided on 10-year US government bonds roared firmly above 3.66%.

For further guidance, investors will keep an eye on the release of the US CPI data, which is scheduled for Tuesday. The economic data is expected to decline amid a continuation of interest rate hikes by the Fed.