GBP/USD Drifts Ahead of a Busy UK Data Week

Sterling is drifting in a tight range against the dollar as traders position ahead of a heavier UK data calendar over the coming days.

Inflation and labour market releases due later this week are likely to be the key swing factors for the pound, with markets keen to gauge whether price pressures are cooling fast enough for the Bank of England to shift its tone.

Implied volatility on GBP/USD has ticked modestly higher heading into the releases, reflecting the market's awareness that a surprise in either direction could move the pair meaningfully.

A hotter-than-expected inflation print would likely reinforce the case for the central bank to hold rates for longer, offering some support to the pound in the near term.

Conversely, a soft labour market reading could revive rate-cut expectations and cap any near-term rallies in cable.