• UK inflation misses forecasts, forcing traders to trim BoE hike bets.
• US Retail Sales beat estimates, reinforcing the consumer resilience narrative.
• Fed dot plot and Warsh press conference to drive the next move.

The Pound Sterling (GBP) retreats towards 1.3400 against the US Dollar (USD) on Wednesday following the latest UK inflation report, forcing investors to reassess hawkish bets on the Bank of England (BoE), while solid US Retail Sales boost the Greenback ahead of the Federal Reserve (Fed) decision. The GBP/USD pair trades with losses of over 0.22%.

GBP/USD retreats as strong US sales revive Dollar momentum

Sentiment remains neutral, as US equity markets fluctuate between gains and losses, with traders awaiting the Federal Reserve’s monetary policy meeting. The US central bank is expected to hold rates unchanged and update its economic projections and the path of interest rates in the Summary of Economic Projections (SEP). After this, the new Fed Chair, Kevin Warsh, will hit the stand at his first press conference leading the Fed.

So far, traders have priced in a nearly 20% chance that the Federal Reserve would raise interest rates towards the end of 2026, according to Prime Terminal data.

In the meantime, US Retail Sales in May expanded by 0.9% MoM, exceeding estimates of a 0.5% increase, according to the US Census Bureau. Digging into the report, gas stations rose 3.4%, lifting the headline figure as gasoline prices jumped due to the Iran war. The data showed consumers' resilience, with 11 of 13 categories posting increases.

Across the pond, UK inflation steadied at 2.8% YoY in May, unchanged from April’s, below economists' estimates for a 3% jump. Speculation that the Bank of England would raise rates was trimmed. A week ago, the BoE was expected to tighten policy by 50 basis points (bps), but at the time of writing, money markets are pricing in a 30-bps tightening.

Ahead, traders eye the Fed’s policy decision and Kevin Warsh's press conference. In the UK, investors are waiting for the release of economic growth figures.

GBP/USD Price Forecast: Technical outlook

In the daily chart, GBP/USD trades at 1.3397, keeping a soft tone as it hovers below a cluster of overhead levels. The pair is capped by the simple moving average around 1.3475 and trades beneath both the reclaimed upward trend-line break at 1.3432 and the broader downward resistance trend line coming in near 1.3551, suggesting rallies remain vulnerable. The Relative Strength Index (14) around the mid‑40s hints at fading momentum, reinforcing a cautious, mildly bearish bias while price holds under these reference levels.

On the topside, initial resistance is seen at the former upward support trendline break around 1.3432, with the simple moving average near 1.3475 forming the next hurdle and the downward resistance trendline at approximately 1.3551 acting as a more distant cap. With no clear structural support levels printed below the market in this dataset, any break under 1.3397 would leave the pair exposed to fresh downside exploration, keeping focus on how price reacts to the nearby resistance band overhead.

(The technical analysis of this story was written with the help of an AI tool.)