GBP/USD continues to climb ahead of key US inflation data

• GBP/USD extended gains on Monday, climbing another 0.35%.
• Market sentiment is holding on the high side as investors bet on Fed rate cuts.
• US inflation data due this week could mar investor sentiment ahead of the Fed's next rate call.

GBP/USD rose further on Monday, extending another 0.35% to recapture chart territory north of 1.3550. General market sentiment is banking on an interest rate cut at the Federal Reserve's (Fed) next meeting on September 17, thanks to rapidly deflating employment figures in the United States (US). However, the latest batch of US Consumer Price Index (CPI) inflation is due this week, and could throw a wrench in interest rate expectations.

GBP/USD is taking a fresh run at technical resistance just below the 1.3600 handle, and technical oscillators plus ongoing support from the 50-day Exponential Moving Average (EMA) are warning that a bullish push could have room to run. However, price action has had a hard time getting back above 1.3600, and could see a fresh swing low if the near-term technical ceiling holds.

US inflation upswing remains key risk for rate cut bets

A general lack of United Kingdom (UK) data leaves the US docket in the driver's seat this week. French Prime Minister Francois Bayou lost a confidence vote within the French Parliament this week; while French politics will have little direct impact on the Pound Sterling (GBP), the general uneasy sentiment that has gripped global politics is no stranger to the UK, and could see elevated risk flight at the drop of a hat.

US Producer Price Index (PPI) inflation data is due on Tuesday, but the key numbers this week will be Thursday's CPI inflation update. Investors are expecting a slight easing in core PPI to 3.5% YoY from 3.7%, while traders are hoping that August's headline CPI print will only rise to 2.9% from 2.7%.

GBP/USD daily chart