GBP/USD flattens as markets await key midweek data

• GBP/USD pulled into the middle on Monday as markets quiet back down.
• Near-term volatility spikes have given way to easy waters.
• Key UK and US inflation data lie ahead in the middle of the week.

GBP/USD continued to flatten out on Monday, trading in place and testing key technical levels as markets buckle down for the wait to a midweek inflation data outing. Recent volatility that saw Cable drop back to long-run averages below 1.2700 have eased into the background for now, and investors will be pivoting to face a round of key inflation prints on both sides of the Atlantic due in the midweek.

Forex Today: UK jobs report and US Producer Prices… for starters

US Producer Price Index (PPI) business-level inflation figures are due on Tuesday. The forecast indicates a decrease in core PPI to 2.7% from 3.0%. On Wednesday, YoY core CPI inflation is expected to drop to 3.2% from 3.3%. Market sentiment relies on a balanced inflation outcome for equities to perform well.

On the UK side, an easy Monday gives way to a packed economic release calendar, with UK unemployment claims on Tuesday and UK CPI inflation slated for Wednesday. Core UK CPI inflation is expected to tick down to 3.4% YoY from 3.5%, while headline CPI inflation is forecast to rise to 2.3% YoY from 2.0%.

GBP/USD price forecast

Cable continues to tease a bearish fall back into the 200-day Exponential Moving Average (EMA) at 1.2649, but bidders have thus far stepped up to keep bids from falling any closer toward the 1.2600 handle. However, bullish momentum has evaporated as GBP/USD remains down over 2% from 12-month peaks just above 1.3000 set in July.

GBP/USD daily chart