GBP/USD prepares for a drop below 1.1050 as risk-off mood soars, US CPI in focus

• GBP/USD is eyeing more weakness below 1.1050 as DXY has rebounded on the risk-off impulse.
• Firmer US NFP data has strengthened the case of a 75 bps rate hike by the Fed.
• Headline US inflation is seen lower at 8.1% vs. the prior release of 8.3%.

The GBP/USD pair has sensed selling pressure while attempting to cross the round-level hurdle of 1.1100 in the Tokyo session. The cable is eyeing more weakness below 1.1050 as the risk-off impulse is gaining traction.

US markets are closed on Monday and on account of Columbus Day while S&P500 has continued its downside movement. The US dollar index (DXY) has recovered a majority of its losses recorded in early Tokyo and has reclaimed the 112.80 hurdle. It is highly likely that a depressed market mood will drive the DXY to the round-level hurdle of 113.00.

The US NFP-infused optimism will keep the DXY in the grip of bulls for a while. On Friday, the US Bureau of Labor Statistics reported that the economy generated fresh 263k jobs in September, higher than the projections of 250k. Also, the Unemployment Rate scaled down to 3.5%. A firmer US employment data has bolstered the case of a fourth consecutive 75 basis point (bps) rate hike by the Federal Reserve (Fed).

This week, the show-stopper event will be the US Consumer Price Index (CPI) data, which is due on Thursday. As per the estimates, the headline inflation will land at 8.1%, lower than the prior release of 8.3%. Thanks to the weaker gasoline prices which are likely responsible for lower consensus for the plain-vanilla inflation rate.

On the UK front, investors' focus has shifted to employment data. The Claimant Count Change is expected to decline by 11.4k vs. an increment of 6.3k. While the ILO Unemployment Rate is seen steady at 3.6%. As price pressures are at elevated levels in the UK economy, therefore, the Average Earnings data will also remain in focus. The economic data excluding bonuses is seen higher by 10 basis points (bps) to 5.3%.