GBP/USD extends its upside above 1.2680 on weaker US Dollar

• GBP/USD gains momentum around 1.2688 amid the weaker USD on Thursday. 
• The US CPI inflation eased to 3.4% YoY in April from 3.5% in March, as estimated. 
• Steady UK wage growth raised fears of persistent inflationary pressures.

The GBP/USD pair extends its upside near 1.2688 on Thursday during the early Asian session. The uptick of the major pair is supported by the weaker Greenback after the release of softer US CPI inflation data. Later in the day, the US Building Permits, Housing Starts, the weekly Initial Jobless Claims, the Philly Fed Manufacturing Index, and Industrial Production will be released. Also, the Federal Reserve’s (Fed) Barr, Harker, Mester, and Bostic are set to speak on Thursday. 

Inflation in the United States eased slightly in April. The Consumer Price Index (CPI) rose 3.4% on a yearly basis in April, compared to an increase of 3.5% in March, according to the US Bureau of Labor Statistics (BLS) on Wednesday. The annual core CPI inflation eased to 3.6% YoY in April from 3.8% in the previous reading. Both figures came in line with the estimation. On a monthly basis, the CPI and the core CPI both rose 0.3% MoM in April. The softer inflation data raised the odds for a Federal Reserve (Fed) rate cut in 2024, which drag the US Dollar (USD) lower and create a tailwind for the GBP/USD pair. 

Furthermore, the final reading of Retail Sales showed no change in April from the previous reading of a 0.6% increase, worse than the market expectation of 0.4%. 

On the GBP’s front, the UK employment data showed job market conditions deteriorated for the third consecutive month as the Unemployment Rate rose. Nonetheless, the Bank of England (BoE) policymakers remain concerned over high service inflation as it could stall progress in the disinflation process. This prompted uncertainty over the BoE interest rate cuts.