GBP/USD held support at Tuesday's 1.2680 low after U.S. retail sales and import-export prices data beat forecasts, which initially boosted the dollar through the channel of higher Treasury yields and firm inflation views, though rising UK wage data ahead of UK CPI Wednesday helped keep cable relatively well bid.

The outlook for sterling may be further boosted after Wednesday's UK CPI.
The data is setting up for a possible upside surprise after UK wages came in hot.

While the UK unemployment rate rose to 4.2%, the number of unemployed in last month's data was revised lower while UK public payrolls increased in June, hinting the battle over high British inflation is far from over.

While UK headline inflation has moved off early 2024 highs above 10%, even if a dip to 6.8% as per Reuters forecast, price growth would remain well-above target and probably keep the BoE hiking rates.

Year-end BoE rate expectations trekked higher after the wage data, pricing +65bp of hikes into year-end 2023, and near +75bp by March-May 2024, when the Fed is expected to begin cutting rates.

The loftier BoE rate expectations, amid a steady Fed view should keep GBP/USD bid and temper further sterling weakness.

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