The GBP/USD pair remained largely steady during Friday's Asian session, trading around 1.3510 as its recent upward momentum showed signs of cooling. Market participants adopted a cautious stance ahead of the US August CPI release, refraining from establishing significant directional positions, which has pushed the pair into a consolidation phase before the data.

Recent US PPI data has already signaled that inflationary pressures persist. According to the US Bureau of Labor Statistics, August PPI rose 5.4% year-on-year, notably higher than July's revised 4.8% and above the market expectation of 5.3%. On a monthly basis, it increased 0.4%, in line with forecasts, while core PPI rose 0.2% month-on-month, slightly below expectations. The accelerated annual PPI reading has reignited concerns about inflation stickiness in the US and lifted market expectations for a September Fed rate hike to approximately 70%.

Meanwhile, the US 10-year Treasury yield has approached 5%, and the US Dollar Index remains near the 99 level, suggesting the greenback continues to hold a relatively strong position. For GBP/USD, rising US rate expectations typically enhance the dollar's relative appeal, placing downward pressure on the pair. Should the US CPI print above expectations, markets may further price in a more hawkish Fed stance, potentially fueling additional dollar strength and driving GBP/USD lower toward key support levels.

Current market forecasts project the US August headline CPI to rise 3.4% year-on-year, with core CPI expected at 2.4% annually and monthly gains of 0.4% and 0.2%, respectively. The release is confirmed for September 11. Notably, oil prices have recently broken above $100 per barrel, presenting a fresh upside risk to the US inflation outlook. Higher energy costs not only directly lift consumer prices such as gasoline but can also transmit through transportation and production expenses to other goods and services. If oil remains elevated, the risk of accelerating overall US inflation increases, which could further shape Fed policy expectations.

This implies the market impact of the upcoming CPI report may extend beyond core inflation to encompass energy price dynamics. If the headline figure rebounds noticeably due to energy costs while core inflation remains relatively subdued, markets may focus more on the inflation structure. However, if both headline and core readings exceed expectations, the dollar's interest rate advantage could widen further.

On the UK side, the pound continues to draw support from Bank of England policy expectations. BoE Governor Andrew Bailey has previously indicated that future rate hikes should not be viewed as an inevitable process, emphasizing that decisions will depend on evolving economic and geopolitical conditions. This suggests that while the central bank still faces inflationary pressures, its policy trajectory is not entirely predetermined. Markets currently anticipate one 25-basis-point rate hike within the year, with additional tightening possibly priced through 2027. Upcoming UK employment and inflation data will be crucial in assessing the BoE's policy direction.

The UK's fiscal situation remains an important factor influencing sterling sentiment. Markets are focused on the late-October budget announcement, and with fiscal policy uncertainty persisting, the pound's medium-term performance could be shaped by both fiscal prospects and growth expectations. Nevertheless, market sentiment toward sterling remains relatively constructive at this stage.

As a result, GBP/USD is facing a clear two-way dynamic. On one hand, hot US PPI data, dollar strength, and rising Treasury yields limit further sterling gains. On the other, a potentially hawkish BoE stance and the pound's inherent resilience provide support beneath the pair. In the near term, the direction of GBP/USD hinges on the US CPI outcome. A stronger-than-expected print could drive USD and Treasury yields higher, potentially pushing GBP/USD back toward the 1.3465 to 1.3445 region. Conversely, a softer CPI reading could cool expectations of further Fed tightening, prompting a dollar pullback and giving sterling room to rally, with the pair potentially retesting 1.3560. Before the US inflation data, markets are more likely to trade within a defined range rather than establish a clear directional trend.

Beyond headline and core CPI figures, traders will also need to monitor the US Dollar Index, Treasury yields, and international oil prices, as these variables could collectively determine the pair's post-data movement. Looking at the daily chart, GBP/USD remains in a range-bound state, holding above the 100-day simple moving average, indicating that the medium-term structure has not clearly deteriorated. However, the price is currently trading near the lower Bollinger Band, with resistance from the middle band overhead. The RSI sits around 48, reflecting neutral momentum with no definitive bullish or bearish trend established. Immediate resistance is seen at the middle Bollinger Band near 1.3560; a decisive break above that level could open the path toward the upper band near 1.3655. On the downside, initial support lies at the lower Bollinger Band around 1.3465, followed by the 100-day moving average near 1.3445. A daily close below 1.3445 could signal a deeper correction from the current consolidation range.

On the 4-hour chart, GBP/USD is maintaining a sideways consolidation, with the 1.3500 level serving as a critical psychological battleground between bulls and bears. If US CPI undershoots expectations and triggers dollar weakness, the pair could reclaim 1.3560 and potentially extend toward 1.3600 and 1.3655. Conversely, if CPI exceeds forecasts and drives USD and Treasury yields higher, GBP/USD slipping below 1.3500 could revisit 1.3465, with further downside targeting 1.3445. Overall, the 4-hour structure has yet to show a clear breakout, and near-term direction remains dependent on the upcoming US inflation trigger.

Summary: GBP/USD currently sits at the intersection of US inflation dynamics and Bank of England policy expectations. After August US PPI accelerated to 5.4%, the dollar and Treasury yields found support, limiting sterling's upside. However, the BoE's potentially hawkish posture and relatively stable market sentiment toward the pound provide a buffer beneath the pair. The most critical near-term catalyst remains the US August CPI release. An inflation surprise on the upside could pull GBP/USD toward 1.3445, while cooling price pressures would alleviate dollar strength and enable the pair to rebound toward the 1.3560 and 1.3655 zones.