The GBP/USD pair traded within a narrow range near the 1.2700 mark during Wednesday’s Asian session, struggling to gather momentum. Spot prices managed to stay above a recent one-month low reached last Friday, as market participants awaited the release of crucial UK consumer inflation figures.
Traders anticipate the headline UK Consumer Price Index (CPI) to show a slight uptick to 0.4% for May, compared to the previous reading of 0.3%. Meanwhile, the annual CPI rate is forecasted to decelerate to 3.5% from April’s 3.9%. These data points are expected to heavily influence the performance of the British Pound (GBP) and provide direction to the GBP/USD pair ahead of the Bank of England (BoE) monetary policy meeting on Thursday.
The subdued price action of the US Dollar (USD) has acted as a supportive factor for GBP/USD, with recent weaker-than-expected US Retail Sales data reinforcing expectations of potential interest rate cuts by the Federal Reserve (Fed) later this year. This sentiment led to a decline in US Treasury bond yields overnight, exerting downward pressure on the greenback.
Given the current fundamental landscape, there is potential for a significant upward movement in the GBP/USD pair. However, the absence of sustained buying interest suggests caution among traders before committing to further positions following the recent rebound from the mid-1.2600s level, which marked a one-month low last week.
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