GBP/USD hovers below 1.2500 ahead of UK inflation data

• GBP/USD recorded a notable surge of 1.79% in the last trading session.
• US CPI eased at 3.2% from 3.7%; Core CPI rose 0.2% against the expected 0.3%.
• BoE may hold off on making any policy adjustments if UK inflation follows the anticipated slowdown.

GBP/USD floats around 1.2480 during the Asian session on Wednesday. The GBP/USD pair saw a notable surge of 1.79%, reaching the 1.2500 zone following the release of weaker US inflation data overnight.

The US Consumer Price Index (CPI) for October revealed lower-than-expected readings, with the annual rate slowing down from 3.7% to 3.2%, falling short of the consensus forecast of 3.3%. The monthly CPI also decreased from 0.4% to 0.0%.

In terms of the US Core CPI, it saw a rise of 0.2%, below the expected 0.3%, and the annual rate eased to 4.0% from the previous 4.1%.

The Dollar Index (DXY) moves sideways near 104.10 at the time of writing, after the substantial losses recorded in the previous session. The index dropped by 1.50%, reaching its lowest level since early September.

The US Dollar (USD) found itself under added strain due to heightened risk appetite and a downward trajectory in US Treasury bonds. The US 10-year yield took a notable dip, hitting an eight-week low at 4.43%.

On Tuesday, the GBP/USD pair witnessed strength following the mixed employment data from the United Kingdom (UK). UK Claimant Count Change reduced to 17.8K in October compared to the 20.4K prior. Claimant Count Rate was maintained at 4.0%. Employment Change saw a decline of 207K in September against the 82K decline previously. Moreover, the UK ILO Unemployment Rate (3M) remained consistent at 4.2% in September.

Wednesday is set to bring forth crucial UK inflation data and Retail Sales figures. The market will be keeping a close eye on these numbers, and if inflation follows the anticipated downward trend, it might keep the Bank of England (BoE) from making any immediate changes to its monetary policy.