COMMENT-Sterling slips from 2024 highs ahead of key US inflation data

GBP/USD fell 0.2% to 1.2720 by early NorAm trading as U.S. Treasury yields drifted slightly higher ahead of the upcoming mini-refunding but it also remained near 2024 highs at 1.2771 as markets prepared for highly anticipated U.S. CPI data that could set the tone for the market.

Thursday's, CPI data will be parsed for clues on the timing of the expected Fed policy pivot to lower rates.

With the U.S. economy leading the pack of developed market central banks in arresting post-pandemic inflation, futures markets, according to Eikon's IRPR pages, are pricing early and deep Fed rate cuts in 2024, which has anchored sterling near late 2023 highs just above 1.28.

While Thursday's CPI data is this week's key data event, GBP/USD traders will keep an eye on UK inflation on Jan. 17. UK inflation has fallen significantly from 7.9% in June to 3.9% in November.

With the Fed pivot to lower rates mostly priced in, there is scope for a UK inflation surprise, lower or higher, to hold significant sway on GBP/USD as the BoE wrestles with its conundrum of low growth and above-target inflation.

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