GBP/USD retreats below 1.2800, exposing critical support levels after hot US inflation

The Greenback remains bid as traders trimmed their bets of a dovish Federal Reserve. The US Department of Labor revealed February’s consumer and producer inflation data, with figures suggesting that prices remain elevated, unable to break below the 3% threshold. In the meantime, a solid Retail Sales report failed to exceed estimates but showed an improvement compared to the prior month’s reading.

Today, the US economic schedule showed that Industrial Production rebounded on February, snapping two months of consecutive deterioration. Manufacturing output came at 0.1% MoM, up from -0.5% contraction in January, and exceeded the consensus according to data revealed by the Fed. Recently, the University of Michigan Consumer Sentiment on its preliminary reading was 76.5, below estimates and the previous reading of 76.9. Americans expect inflation to remain at 3% in the 12 months from March and for five years at 2.9%.

Across the pond, a softish labor market report weakened the Cable. A rise in the unemployment rate and a dip in Average Earnings excluding Bonuses, a measure of wage inflation, dipped from 6.2% to 6.1%. The data sparked markets to ramp up bets on a Bank of England (BoE) rate cut in June.

In the meantime, traders brace for the next week’s monetary policy decisions by the Fed and the BoE. The consensus expect both institutions to hold rates unchanged, though any dovish hints, could trigger a reaction by the financial markets. Traders would also be looking at the release of inflation figures in the UK