Sterling Faces Uncertainty Ahead of BoE Rate Decision and Inflation Data

The British Pound (GBP) is showing caution as the week begins, with investors feeling uncertain about the economic outlook in the UK. There's widespread anticipation of an upcoming interest rate increase from the Bank of England (BoE), and this decision is set to be announced on Thursday. The BoE finds itself unable to pause its policy-tightening efforts due to persistent inflationary pressures and strong wage growth momentum.

Before the BoE makes its interest rate decision, investors will be closely monitoring Wednesday's inflation data. The headline Consumer Price Index (CPI) is expected to rise, driven by increased energy prices resulting from the recent global oil price surge over the last four months. Core inflation remains relatively stable, primarily due to a higher labor cost index. There's uncertainty among market participants regarding whether UK Prime Minister Rishi Sunak will fulfill his commitment to reducing headline inflation to 5% by the end of the year. Sunak made this promise when headline inflation was in double digits back in January.

GBP/USD selling pressures continue breaking the 1.2400 support level. The next target will be the 1.2300. The dollar may make a possible correction soon and if this happens then the pair may correct.

Resistance 3	Resistance 2	Resistance 1	Support 1	Support 2	Support 3
1.2750	1.2650	1.2580	1.2400	1.2300	1.2200