The Pound Sterling (GBP) is advancing against the US Dollar (USD) on Tuesday due to an upbeat market mood as traders are relieved of United States (US) reciprocal tariffs, which are expected to be targeted on some of the US trading partners. This weakened the Greenback as seen by GBP/USD trading at 1.2950, up 0.22%.

Sterling edges higher to 1.2950 amid calm markets, though looming inflation data and budget risks cap gains
The economic docket is empty on both sides of the Atlantic, with traders eyeing the release of United Kingdom (UK) inflation figures on Wednesday and the UK Spring Budget. The Consumer Price Index (CPI) in February is expected to dip from 3% to 2.9% YoY, while core figures are projected to cool from 3.7% to 3.6% in the twelve months to February.
The UK Chancellor of the Exchequer, Rachel Reeves, is expected to outline spending cuts and belt-tightening measures in the upcoming budget to meet the financial targets.

Francesco Pesole, currency strategist at ING, said, "There's a very fine line not to unnerve the gilt market," which could knock confidence in the UK and weigh on the pound.

In the US, Federal Reserve (Fed) Governor Adriana Kugler stated the uptick in goods inflation is "unhelpful." She said, "In certain subcategories, there is evidence that inflation reaccelerated in recent months," adding that she's paying close attention to inflation expectations.

Recently, New York Fed President John Williams stated that companies and households are experiencing heightened uncertainty about the future of the economy.

Even though both Fed policymakers struck a neutral tone, GBP/USD has failed to add to recent gains. Fears that inflation in the US could accelerate might prompt traders to buy the US Dollar due to lower chances that the Fed might reduce borrowing costs.

Ahead this week, the US economic docket will feature additional Fed speakers and the release of the Fed's preferred inflation gauge, the Core Personal Consumption Expenditures (PCE) Price Index.

Source: Fxstreet