GBP/USD dives to 1.3800 mark, fresh session lows on hotter-than-expected US CPI

• A combination of factors prompted some fresh selling around GBP/USD on Tuesday.
• COVID-19 jitters, Brexit woes continued acting as a headwind for the British pound.
• Upbeat US CPI report pushed the USD higher and added to the intraday selling bias.

The GBP/USD pair dived to fresh daily lows in reaction to hotter-than-expected US consumer inflation figures, with bearish now eyeing sustained weakness below the 1.3800 mark.

Having struggled to find acceptance above the 1.3900 mark, the GBP/USD pair came under some renewed selling pressure on Tuesday and was weighed down by a combination of factors. The disappointing data released by the British Retail Consortium (BRC), along with COVID-19 and Brexit woes turned out to be key factors that acted as a headwind for the British pound. This, along with a goodish pickup in the US dollar demand, contributed to the pair's intraday decline.

The intraday USD buying picked up pace during the early North American session following the release of the latest US consumer inflation figures. In fact, the headline CPI smashed market expectations and accelerated to 5.4% YoY in June. Data published by the US Bureau of Labor Statistics further revealed that CPI at the core level jumped 4.5% YoY during the reported month.

The June FOMC meeting minutes released last Wednesday revealed that Fed officials agreed on the need to be ready to act if inflation or other risks materialize. The latest CPI report further fueled market speculations that the Fed is moving towards tightening its monetary policy stance sooner than anticipated and provided an additional boost to the already stronger USD.

With the latest leg down, the GBP/USD pair has reversed a major part of its gains recorded last Friday. Some follow-through selling below the 1.3800 mark will be seen as a fresh trigger for bearish traders and set the stage for additional intraday losses.

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