GBP/USD remains under pressure below the 1.2670 area, investors await UK inflation data, FOMC Minutes

• GBP/USD extends its downside around 1.2665 in the Asian session on Monday.
• The UK growth rate unexpectedly grew to 0.5% MoM in June, versus the market consensus of 0.2%.
• The US Producer Price Index (PPI) YoY grew by 0.8% in July from 0.1% in June.
• Market players await the UK inflation data, US Retail Sales and FOMC Minutes.

The GBP/USD pair remains under pressure and trades in a negative territory for the fourth consecutive week. The major pair currently trades around 1.2665, down 0.23% for the day. The upbeat UK data fails to lift the Pound Sterling as investors are concerned about the possibility of a further rate hike that would impact the UK economy.  

On Friday, the UK economy grew unexpectedly by 0.5% MoM in June, versus market consensus of 0.2% and a 0.1% decline in the previous month. Additionally, UK Industrial Production rose 1.8% on a monthly basis in June, above the expectation of a 0.1% increase and a 0.6% drop prior. Lastly, Manufacturing Output came in at 2.4% m/m, better than expected of 0.2% and 0.1% drop in the previous reading.

The stronger UK economic data increases the odds that the Bank of England (BoE) will raise the additional interest rate. However, market participants are cautious about the BoE move as the UK economy is fragile and the interest rate is at a 15-year high of 5.25%. The aggressive monetary policy could have a negative impact on the UK economy. However, the UK inflation data and wage figures due later this week, will offer hints for the BoE decision in the next meeting.

On the US Dollar front, the US Bureau of Labour Statistics reported on Friday that the US Producer Price Index (PPI) for final demand YoY rose 0.8% in July from 0.1% in June. The figure was higher than the market expectation of 0.7%. Additionally, the University of Michigan's (UoM) Consumer Confidence Index for July fell to 71.2 from 71.6, better than 71 expected. Finally, UoM 5-year Consumer Inflation Expectations declined to 2.9% for August versus 3.0% estimated and prior.

Looking ahead, the UK Claimant Count Change for July, Consumer Price Index (CPI), and Retail Sales MoM will be released from the UK docket later this week. On the other hand, investors will also focus on US Retail Sales, FOMC Minutes and the comment from the Fed official to take cues and find a clear direction in the GBP/USD pair.