GBP/USD consolidates daily losses below 1.38

• UK CPI comes in line with expectations.
• DXY looks to close the day slightly higher.

Despite the critical macroeconomic data releases from the UK, the GBP/USD stayed in a relatively tight 60-pip range on Monday. After finding support at 1.3740 during the American trading hours, the pair started to retrace its losses and was last seen trading at 1.3780, where it was down 0.1% on the day.

Earlier today, the data from the UK showed that the inflation measured by the CPI eased to 3% from 3.1% on a yearly basis and met the market expectations while the core-CPI edged lower to 2.5% from 2.7%. Commenting on the data, "This will take some of the heat off the Bank of England to hike later this year, although of course a lot still depends on Brexit. The likely agreement-in-principle of a transition deal by the end of the first quarter means a rate hike in May is possible, although not yet guaranteed. Whatever the Bank decides, the window to squeeze in another rate hike is likely to close over the summer, as Brexit starts to heat up ahead of October's artificial deadline for a deal," ING economists argued in a recent article.

On the other hand, the US Dollar Index made a technical correction, keeping the selling pressure on the pair intact. After closing the previous day at its lowest level in more than three years, the pair recovered to 90.58 before losing its momentum. At the moment, the index is up 0.25% at 90.35.

Technical outlook

Valeria Bednarik, American Chief Analyst at FXStreet, writes, "the 4 hours chart for the pair shows that technical indicators erased overbought conditions, but also that the RSI indicator resumes its advance, currently at 65, as the pair holds well above a bullish 20 SMA, this last near 1.3700. The downward potential seems well-limited, amid absent dollar's demand, with the currency's latest recovery attributed to some profit-taking. A recovery above 1.3780, should favor additional gains ahead, with a break of 1.3820 supporting an extension up to 1.3850."