GBP/USD regains 1.1500 on hawkish BOE bets, Brexit chatters, UK inflation eyed

• GBP/USD pares the biggest daily slump in four months amid sluggish session.
• US dollar consolidates inflation-led rally amid mixed concerns, stimulus hopes.
• UK’s Prince Charles question DUP stance on Brexit, shows readiness to help overcome inflation, energy crisis.
• UK CPI to stay worrisome in August, US PPI, consumer-centric data are also important ahead of next week’s FOMC.

GBP/USD licks US inflation-linked wounds around 1.1500 as the cable traders await the UK Consumer Price Index (CPI) data amid hawkish hopes from the Bank of England (BOE). In doing so, the quote pares the biggest daily decline since May during early Wednesday morning in Europe.

“The Bank of England (BOE) looks set to hike borrowing costs by another 50 basis points (bps) next week, although it may opt for an even bigger move, adding to the woes of indebted households already facing a cost of living crisis,” stated the latest Reuters poll of economists.

Improvement in the market sentiment could also be linked to the GBP/USD pair’s rebound. That said, the same could be linked to the comments from US President Joe Biden, as well as hopes of more stimulus from China and a solution to the European energy crisis.

Furthermore, news from the UK’s Daily Mail, quoting the Irish PM Micheál Martin, also seemed to have helped the GBP/USD buyers. The Irish PM Martin said, per the news, that Queen's death is a chance to 'reset' relations between Britain and Ireland and 'enhance' links following Brexit rows.

On the other hand, fears emanating from the US-Taiwan ties and the US inflation numbers challenge the GBP/USD buyers ahead of the key UK CPI data. The US Treasury bond yields continue to signal the recession woes ahead and hence challenge the pair buyers. That said, the US 10-year Treasury yields poke a three-month high around 3.45% while its two-year counterpart prints 3.80% figures at the latest. With this, the inverted yield curve between the 10-year and the two-year bond coupons keeps suggesting the fears of economic slowdown. On the same line could be Wall Street’s biggest daily slump in two years, as well as cautious moves of the S&P 500 Futures.

Furthermore, headlines suggesting Taiwan’s hosting of multiple foreign lawmakers in Washington to Push China sanctions and US lawmakers voting on financing arms for Taipei also test the GBP/USD bulls.

It's worth noting that market sentiment worsened the previous day, which in turn drowned the GBP/USD prices, after the US Consumer Price Index (CPI) for August rose past 8.1% market forecasts to 8.3% YoY, versus 8.8% prior.

Looking forward, the UK CPI, expected 10.2% YoY versus 10.1%, will be crucial for the GBP/USD bulls amid hawkish hopes from the BOE and a delayed monetary policy due to the British Queen’s death. Should the inflation numbers keep flashing upbeat outcomes, the odds of the BOE’s next rate hike will escalate and can help the GBP/USD to extend the latest rebound.

Also important will be Thursday’s August month US Retail Sales and Friday’s preliminary reading of the Michigan Consumer Sentiment Index for September.

Technical analysis

GBP/USD pair’s sustained pullback from the 21-DMA, around 1.1670 by the press time, coupled with the impending bear cross of the MACD, keep the sellers hopeful of revisiting the yearly low surrounding 1.1400.