GBP/USD: US Inflation Gauge Signals Tightening Continues.

According to the latest economic data, the US Federal Reserve's preferred inflation gauge suggests that the cumulative tightening measures are still curbing inflation. The University of Michigan's Consumer Sentiment was worse than anticipated, but inflation expectations cooled. The GBP/USD Price Analysis shows that the Pound Sterling is trading with decent losses, with pressure from a resurgent US Dollar trimming its Thursday's losses. While inflation data could lead to a pivot in the Fed's policy stance, market participants are still buying the US Dollar as the week, month, and quarter-end approaches. As of writing, the GBP/USD is trading at 1.2331, and it would remain sideways around 1.2300-1.2400, or it could challenge the YTD high if it goes above 1.2400.

Despite the lower US inflation, Fed officials remain resolute in their efforts to fight inflation. The US Department of Commerce's economic data revealed that the Fed's favorite inflation gauge, the core PCE, increased by 4.6% YoY, below forecasts and last month's reading of 4.7%. The headline inflation was 5%, indicating that the Fed's cumulative tightening measures continue to keep inflation in check. The Fed Boston President Susan Collins welcomed the news but reiterated that there is still work to be done. The New York Fed President, John Williams, is expected to release newswires later.

Meanwhile, the University of Michigan's final March reading showed that the Consumer Sentiment was worse than expected at 62, but inflation expectations decreased. For the one-year horizon, the estimated inflation rate is 3.6%, while consumers estimate inflation to be 2.9% for the 5-year horizon.

After the release of US inflation data, the GBP/USD initially traded around 1.2400 before dropping below the central pivot point at 1.2357 and extending its losses towards the 1.2340 area. However, the upward correction was capped at the former, and the GBP/USD resumed its downward trajectory, aiming for a test of the S1 pivot at 1.2320.

On the UK front, the economy expanded by 0.1% in Q4 2022 and by 0.6% YoY, according to the Office for National Statistics (ONS) data.

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