In the Asian trading session on Tuesday, GBP/USD fell further to about 1.3390. The US dollar is gaining strength against the British pound, thanks to some easing in trade tensions between the US and China. Traders are now looking ahead to the UK’s September consumer price index (CPI) inflation figures, which are due to be released on Wednesday.
The trade tensions between the US and China seemed to improve on Friday following comments from US President Donald Trump. He indicated that the proposed 100% tariffs on Chinese goods weren’t a sustainable approach. However, he held China responsible for the current deadlock in negotiations, citing the tightening of controls on rare earth shipments from Chinese authorities.
Trump’s softer stance and the announcement of a meeting with Chinese President Xi Jinping have provided some backing for the US dollar and created challenges for major currency pairs. According to U.S. Treasury Secretary Bessent, there will be talks in Malaysia this week to prepare for the anticipated meeting between Trump and Xi at the upcoming Asia-Pacific Economic Cooperation meeting in South Korea later this month.
The release of the UK CPI data is particularly important as it could give insights into the Bank of England’s (BoE) rate-cutting strategy for the rest of the year. Persistent inflation is a significant factor in the BoE’s cautious approach to potential rate decreases. Last month, BoE Governor Andrew Bailey mentioned that the Bank is “not out of the woods yet” regarding inflation.
The expected headline CPI for the UK is around a 4.0% year-on-year increase in September, while the core CPI is anticipated to rise by 3.7% year-on-year during the same period. Any indications of sustained inflation could lead traders to adjust their expectations regarding rate cuts, which might push the pound higher against the US dollar in the near future.
