GBP/USD in focus as UK July headline CPI accelerates, core inflation steady

Sterling faces a fresh inflation test as UK July CPI data shows headline price growth picking up while core inflation holds steady, keeping GBP/USD sensitive to Bank of England repricing. The acceleration stems largely from the Ofgem energy price cap adjustment effective in July, with households estimated to be paying around £221 more on average annually for energy. Services inflation, the BOE's preferred gauge of domestic price persistence, is seen easing slightly to 3.4% from 3.6% in June, driven by a smaller year-on-year increase in air fares compared with the same period last year. The divergence between a hotter headline print and cooling services inflation complicates the BOE's path, as energy-driven inflation is typically viewed as transitory while services momentum guides policy. Traders should watch GBP/USD reaction around the 1.3400-1.3500 zone, with softer services data potentially reviving rate-cut bets and pressuring the pound, while sticky core readings could offer support. EUR/GBP and GBP/JPY are likely to see correlated volatility around the release.