GBP/USD to test 1.2260, downside remains favored on higher US CPI, UK GDP eyed

• GBP/USD may find significant offers after a pullback to near 1.2260.
• Higher US CPI has bolstered the odds of a 75 bps rate hike by the Fed.
• The UK GDP is seen diverted on monthly and yearly figures.

The GBP/USD pair has displayed a downside break of its week-long consolidation placed in a range of 1.2260-1.2400. The asset may test the lower range of consolidation to verify bears’ strength but the downside is intact as higher US inflation numbers have strengthened the odds of a bumper rate hike by the Federal Reserve (Fed) in June.

As per the street estimates of 8.1%, US Consumer Price Index (CPI) has outperformed after printing the figure of 8.3% on Wednesday. Markets pundits were expecting that the figure of 8.1% US CPI will advocate a 50 basis point (bps) interest rate hike by the Fed in its June monetary policy. Now, a higher-than-expected US inflation figure has bolstered the odds of a 75 bps rate hike. This has shaken the FX arena and investors are dumping the risk-sensitive assets like there is no tomorrow.

Meanwhile, the US dollar index (DXY) is struggling to sustain above 104.00 but the upside is intact. On the pound front, investors are awaiting the release of the UK Gross Domestic Product (GDP) numbers. The quarterly UK GDP is seen at 1% against the prior print of 1.3% while the yearly figure may land at 9% in comparison with the 6.6% reported earlier. A higher-than-expected UK GDP may cushion sterling from further downside while a more vulnerable figure would elevate the sell-off in the asset.