GBP/USD keeps pullback from one-month top around mid-1.3900s ahead of UK CPI

• GBP/USD takes a U-turn from intraday top after snapping a six-day uptrend the previous day.
• US dollar recovery, backed by covid woes, superseded upbeat UK jobs report.
• British inflation figures, risk catalysts should be followed for fresh impulse.

GBP/USD eases from the day’s high to 1.3940 while searching for fresh direction, following Tuesday’s heavy pullback, amid Wednesday’s Asian session.

The sterling dropped heaviest, after refreshing the monthly top, despite upbeat UK jobs report as the US dollar gained bids over the coronavirus (COVID-19) fears.

The global covid infections grew 12% on the weekly basis, led by the jump in India’s new cases. As a result, the US decision to put over 80% of the globe under the “not to travel” list and the UK’s travel restrictions seem justified. The same virus woes push Japan towards recalling the emergencies once led in Tokyo and surrounding prefectures.

Elsewhere, the UK announced relief for the British truckers over Brexit norms on Tuesday. As per Reuters, “Britain on Tuesday eased controls designed to prevent a backlog of trucks in southern England caused by new post-Brexit paperwork, saying vehicles taking goods to the European Union would no longer need a special permit to enter the port region.”

Against this backdrop, S&P 500 Futures print mild losses while taking clues from the second day of downside by the Wall Street benchmarks. Additionally, the US 10-year Treasury yield keeps the previous day’s recovery moves but the US dollar awaits more clues to extend the bounce-off seven-week low, portrayed on Tuesday.

Although virus-led pessimism is likely to weigh on GBP/USD, the UK’s inflation figures for March will be the key to watch as the Bank of England (BOE) sounds bullish off-late. Forecasts suggest the headline Consumer Price Index (CPI) rise from 0.4% to 0.8% YoY.

Ahead of the data, TD Securities said, “March inflation figures are released, and given the sharp downside surprise to last month's figures, there's elevated uncertainty about how quickly prices might rebound. We see mild downside risk to headline inflation at 0.7% y/y (mkt: 0.8%, BoE: 1.1%) while core inflation registers 1.1% y/y (mkt: 1.1%).

Technical analysis

Although failures to cross the 1.4000 threshold on the daily closing basis keep GBP/USD sellers hopeful, the early-month tops near 1.3920 and the 50-day SMA surrounding 1.3870 should test the cable’s short-term downside.