GBP/USD edged slightly higher in early NorAm, +0.1% at 1.2465, though the outlook remains slightly pessimistic as traders seek further clarity on BoE rate expectations after Wednesday's lower, but slightly above forecast, UK CPI data.

This year's GBP/USD performance has been dominated by rate expectations as market views became more hawkish on the Fed and more dovish on the BoE, contributing to sterling's slide from its 2024 high at 1.2894 on March 8, to current levels just above the 2024 low of 1.2405 struck on April 16.

High inflation in the UK remains the key data point for sterling traders while the inability to maintain downward momentum in U.S. price pressures has fueled a reduction in Fed rate-cut expectations, with markets now discounting a scant 42bp of easing through December versus -150bp earlier this year.

Should UK core inflation stall above 4%, similar to U.S. core inflation's inability to move below 3%, GBP/USD may drift higher.

However, if UK inflation resumes its decline toward the BoE's 2% target, more dovish BoE expectations will send GBP/USD careening lower still, putting October 2023 lows just above 1.20 in sharper focus.

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