GBP/USD eyes 1.2500 as UK Inflation shows no evidence of ditching double-digit territory

• GBP/USD is aiming to reclaim the 1.2500 resistance as the USD index is expected to correct further.
• The Fed is widely anticipated to pause its policy-tightening process in June.
• The risk impulse is positive as investors are expecting that the US debt-ceiling will get raised this week.

The GBP/USD pair has gauged an intermediate support around 1.2480 after a mild correction and is looking to reclaim the psychological resistance of 1.2500. The Cable is expected to get stronger due to a correction in the US Dollar Index (DXY) and an absence of evidence of United Kingdom inflation softening ahead.

S&P500 futures are showing nominal losses in early Asia followed by a meaningful bullish Wednesday as the White House and Republican leaders are expected to approve the deal of raising the US debt ceiling. However, spending initiatives for the budget will get compromised as each member who attended US debt-ceiling talks admitted that a raise in the US borrowing cap along with a higher spending budget will be a disaster for the economy. The overall market mood is indicating that investors have underpinned the risk-appetite theme.

The US Dollar Index (DXY) witnessed an extreme selling pressure around 103.10 and dropped to near 102.80. Further downside in the USD index seems possible as investors are shifting their focus to June’s monetary policy meeting by the Federal Reserve (Fed) in which a neutral stance on interest rates is widely anticipated.

On the Pound Sterling front, higher inflationary pressures are causing worry for the Bank of England (BoE) policymakers. On Wednesday, BoE Governor Andrew Bailey cited that easing of United Kingdom labor market tightness is happening at a slower pace than we expected in February and the labor market remains very tight.

Also, UK Finance Minister Jeremy Hunt said on Wednesday, there is “nothing automatic about bringing down inflation.” He further added the administration supports the BoE fully and is focusing on getting taxes down.