- GBP/USD witnessed some selling on Wednesday and snapped three days of the winning streak.
- The risk-off mood, hotter-than-expected US CPI boosted the safe-haven USD and exerted pressure.
- The upbeat UK economic outlook might help limit any deeper losses for the major, at least for now.
The GBP/USD pair added to its intraday losses and dropped to fresh session lows, below the 1.4100 mark in reaction to hotter-than-expected US consumer inflation figures.
Having struggled to find acceptance above mid-1.4100s, the pair witnessed a modest pullback on Wednesday and snapped three consecutive days of the losing streak. The prevalent risk-off mood drove some haven flows towards the US dollar, which, in turn, was seen as a key factor that dragged the GBP/USD pair away from the highest level since February 25 touched in the previous session.
The intraday USD buying picked up pace after data released from the US showed that headline CPI accelerated to a 4.2% YoY rate in April. This was significantly above consensus estimates pointing to a reading of 3.8%, the Fed 2% target and marked the highest level since 2008. Adding to this, the core CPI also surpassed expectations and jumped 3.0% YoY from 1.6% recorded in the previous month.
The stronger readings added to the market worries that the rapid rise in prices may be something more than transitory and could push the Fed to tighten its policy earlier than expected. That said, the upbeat outlook for the UK economic recovery from the pandemic might continue to act as a tailwind for the British pound and help limit any further losses for the GBP/USD pair.
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