GBP/USD began Monday trading in a relatively flat position, remaining capped near Thursday's high of 1.27. Traders are currently evaluating the implications of recent softer U.S. CPI data contrasted with unexpectedly high U.S. import prices. This juxtaposition has left the market in a state of uncertainty, as it weighs the potential outcomes of next Wednesday's key UK inflation data release. The anticipated data could significantly influence the Bank of England's (BoE) policy direction, possibly leading to a pivot towards a more dovish stance in June. Sterling managed to retain most of the gains from Wednesday's U.S. CPI-related surge, which had propelled GBP/USD to a five-week high of 1.27. However, market participants remain cautious about challenging the April 9-10 peak at 1.2709, especially after the hot U.S. import price data dampened the prevailing disinflationary sentiment. Adding to this resistance are dovish remarks from MPC member Megan Greene, reinforcing perceptions of a potential shift towards softer BoE policies following the latest policy vote.

From a technical analysis perspective, GBP/USD faces significant resistance at the 1.27 level, which coincides with the high from April 9-10. Should the UK inflation data support a dovish shift in BoE policy, we could see the pair testing minor support levels at the 100-DMA near 1.2632 and the 55-DMA around 1.2603. Further downside movement could lead GBP/USD to explore Wednesday's long candle low at 1.2585, and potentially the May 14 low at 1.2510. On the fundamental analysis front, the market outlook hinges heavily on the upcoming UK inflation data. If the data confirms a significant cooling in inflation, it would bolster the case for a more accommodative BoE stance, thereby putting downward pressure on sterling. Conversely, if inflation remains stubbornly high, it could force the BoE to maintain a more hawkish approach, providing support for GBP/USD. In either scenario, the interplay between UK inflation trends and BoE policy responses will be crucial in determining the near-term trajectory of the pair.