Hurdles lie in wait for GBP/USD near 1.1500; focus is on US Retail Sales

The GBP/USD pair is slightly higher after bouncing off 1.1526 during the late New York session. The pair is expected to move in a narrow range as investors wait for the release of U.S. Retail Sales data. After re-testing a low of 1.1480 twice on Wednesday, the asset's overall price rose sharply. The market's expectation of an increase in the United Kingdom's inflation rate was disproven, which boosted the bullishness of the pound.

United Kingdom headline Consumer Price Index (CPI) came in at 9.9%, which was below both the forecast of 10.2% and the prior data of 10.1%. Even though the economy is suffering greatly from skyrocketing energy costs, policymakers at the Bank of England (BOE) are ecstatic by the recent drop in headline CPI. With this negative number, the British economy can finally breathe a sigh of relief. Formerly, market experts estimated that inflation in the pound zone would hit 13%-14%. Therefore, it would be incorrect to identify the situation as a "depletion of pricing pressure."

Following a meteoric ascent, the value of the US dollar index (DXY) has leveled off. The market has begun pricing in a 1% rate hike at the Federal Reserve's monetary policy meeting in September, thus the DXY is likely to remain at high levels (Fed). Though it has tightened monetary policy over the previous six months, the Federal Reserve is once again in a neutral position. The Fed has reason to be concerned because the actual reading on core CPI, at 6.3%, was higher than expectations of 6.2%.

Data on US retail sales will be the main focus of today's trading session. Preliminary reports indicate there has been no uptick in retail demand. Stagnant consumer demand is a bad sign for the economy since it indicates a decline in consumer confidence.