GBP/USD looks to regain 1.2200 amid downbeat expectations from US inflation

• GBP/USD picks up bids to snap two-day downtrend.
• Fears from UK’s public sector workers’ strike challenge bulls despite broadly softer US Dollar.
• Dovish Fedspeak, market’s optimism adds strength to Cable’s recovery moves.
• US CPI for December will be crucial for near-term directions, softer print could add to weekly gains.

GBP/USD buyers flex muscles around the mid-1.2100s, following the downbeat performance in the last two days, as markets await the key US Consumer Price Index (CPI) for December during early Thursday. In doing so, the Cable pair remains well-set for the biggest weekly gains since late November.

The quote’s latest weakness could be linked to the likely increase in the UK’s economic hardships due to the fears emanating from the strikes of the British public sector workers. To solve the same, UK Prime Minister Rishi Sunak eased his front to come to a mid-point but the situation didn’t improve and the unions are warning over a much bigger protest starting from February 01. “Britain's Public and Commercial Services (PCS) union said on Wednesday 100,000 of its members across 124 government departments would take strike action on Feb. 1 in a dispute over pay, pensions and job security,” reported Reuters.

Elsewhere, the market’s cautious optimism amid the risk-positive headlines surrounding China, as well as receding fears of hawkish Fed actions seemed to have kept the GBP/USD buyers hopeful.

Recently, Federal Reserve’s Boston President Susan Collins backed the smaller rate increases while stating that she leans at this stage to a 25 bps hike. However, she also mentioned that it is very data-dependent.

On other hand, China’s total reopening and early signals of heavy holiday shopping join the chatters that the People’s Bank of China (PBOC) will adhere to rate cuts in 2023 to spread the Beijing-inspired optimism.

It should be noted that the firmer prints of equities and downbeat US Treasury yields also restricted GBP/USD downside despite not-so-positive headlines from the UK. That said, the US 10-year Treasury yields dropped nearly eight basis points (bps) 3.54% while Wall Street closed in the green.

Looking forward, GBP/USD traders are likely to witness further recovery moves amid downbeat expectations from the US CPI data, expected 6.5% YoY versus 7.1% prior. Considering this, analysts at Australia and New Zealand Banking Group (ANZ) said, “Current price action indicates that the market wants and is expecting a fairly benign data print. The consensus is that core CPI rose 0.3% m/m; we are forecasting 0.4% m/m.”

Technical analysis

Wednesday’s Dragonfly Doji and the GBP/USD pair’s ability to remain firmer past 21-DMA, around 1.2085 by the press time, keeps buyers hopeful.