GBP/USD traded near flat on Friday after overcoming earlier losses driven by UK data showing the economy on the verge of recession and finding support near 1.2080 as traders acted cautiously ahead of a highly anticipated U.S. CPI report next Tuesday.

The UK GDP data showed no growth in Q4 2022 after falling 0.2% in Q3, technically avoiding a recession for now, though a challenging economic backdrop of industrial strikes and high inflation leave the BoE prediction of a shallow but lengthy recession an ongoing risk.

GBP/USD's bounce off lows sub-1.21 comes despite U.S. rates holding near trend highs.

The recent shift in U.S. rate expectations in line with the Fed's 5-5.25% terminal rate view had weighed on GBP/USD recently, but that move may have run its course.

With projecting peak fed funds at 5.15% 0#FF:, GBP/USD bears may not be able to count on the Fed.

Tuesday's U.S. CPI release now comes into sharp focus.
A moderation in U.S. inflation that caps the Fed outlook would release GBP/USD to advance toward 2023 highs above 1.24.

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