GBP/USD: Sterling Seeks to Rebound After UK Inflation Meets Consensus at 3.4% in May

UK currency was trading higher by just 0.2% — does it have the fuel to pare back yesterday’s 1% loss?

📊 Inflation Lands as Expected

• The GBPUSD pair edged up 0.2% to $1.3460, making a small dent in Tuesday’s sharp 1% drop, after traders scooped up the UK currency following the latest inflation print.
• In May, consumer price growth met consensus calls with a 3.4% increase, the CPI reading showed. Core CPI rose 3.5% year-over-year in May, down from April’s 3.8%. The moderation offers some relief but leaves inflation well above the Bank of England’s 2% target.
• UK Finance Minister Rachel Reeves took a cautiously optimistic tone, crediting government efforts for stabilizing public finances while warning: “There’s more to do.” Markets read that as a nod to persistent economic headwinds.

🏦 Caught Between Inflation and Growth

• What does it mean for the Bank of England? It’s staring at an increasingly tricky balancing act as it heads into its next rate decision on Thursday. Inflation remains sticky while growth continues to underwhelm — not exactly a recipe for bold cutting actions.
• Against this backdrop, the central bank is widely expected to hold rates steady, with economists eyeballing a potential 25 basis point cut in August if inflationary pressures continue to ease.
• Traders are watching for any signs in Thursday’s statement that the BoE is preparing to shift toward a more dovish stance — but with growth fragile, policymakers may choose to keep their powder dry a little longer.

🌎 All Eyes on the Fed First

• Before the BoE grabs the spotlight, the Federal Reserve is already meeting for its two-day event. Later today, Chair Jay Powell will take the stage for a press conference that will be the thunder (because a hold is already priced in).
• Forex gurus, influencers, and speculators will parse Powell’s Fedspeak for any signals on the US rate path, especially as global trade tensions and geopolitical risks complicate the inflation narrative.
• Currencies broadly could get jumpy if Powell suggests another stretch of higher-for-longer rates, potentially widening the yield gap against sterling and weighing on the pound-dollar’s rebound journey.