GBP/USD Bears Eye 1.2800 As UK Inflation Indicators Challenge BoE Hawks And They Concentrate On US ISM PMI

GBP/USD maintains losses near 1.2830 after observing a negative UK inflation signal early Tuesday morning in Asia, extending the week's losses. This justifies the broad US Dollar strength ahead of the US ISM Manufacturing PMI for July, as well as the final readings of the US S&P Global PMIs and the UK S&P Global/CIPS Manufacturing PMI for the same month.

The British Retail Consortium (BRC) Shop Price Index for June decreased to 7.6% from 8.4% previously and the 8.4% three-month average, signifying the first decline in two years on Monday evening. Helen Dickinson, chief executive officer of the British Retail Consortium, noted optimism in the latest data but also warned of "dark clouds on the horizon"

Reuters reported on Monday that a Bank of England (BoE) survey indicated that British lenders approved more mortgages than anticipated in June and that net unsecured lending to consumers increased by the most in over five years despite rising interest rates.

Notably, the recent easing of the market's hawkish bias towards the BoE, coupled with muddled UK data, has weighed on the GBP/USD pair. Despite unimpressive US data, the latest challenge to sentiment and the strengthening US Dollar may also exert downward pressure on the Pound.

Reuters suggests that market sentiment deteriorates as China's Commerce Ministry renews Sino-US trade war concerns by announcing measures to limit exports of certain drones and drone-related equipment beginning September 1, citing "national security and interests." According to the Fed's quarterly Senior Loan Officer Opinion Survey (SLOOS), US banks reported stricter credit standards and weaker loan demand in the second quarter of 2023 (Q2 2023).

Despite conflicting US data, it is also noteworthy that the US Dollar Index (DXY) managed to remain stronger on Monday, grinding higher towards 102.000 as of press time. Nevertheless, the Dallas Fed Manufacturing Business Index improved to -20.0 in July from -23.2 in June, while the Chicago PMI rose to 42.8 from 41.5 in June, exceeding market expectations of 43.0. In doing so, the DXY disregards Friday's milder US inflation indicators and Minneapolis Fed President Neel Kashkari's weekend criticism of higher interest rates.

In this context, S&P500 Futures remain inactive after a positive start to the week, while United States Treasury bond yields acquire bids after falling for two consecutive days.

GBP/USD pair traders will be interested in the final readings of the UK S&P Global/CIPS Manufacturing PMI for July and the US S&P Global PMIs for the same month before the US ISM Manufacturing PMI. If the scheduled data and negative sentiment manage to impress US Dollar investors, the GBP/USD pair may breach the crucial 1.2780 support level.