The GBP/USD currency pair edged lower during Asian trading on Wednesday, retracting part of the previous day’s strong gains that pushed it to a four-month high around 1.2965. Spot prices currently hover near the 1.2935 level, though the decline lacks strong bearish momentum as traders await the release of key US inflation data before making significant moves.
The upcoming US Consumer Price Index (CPI) report is expected to be a pivotal factor in shaping market expectations regarding the Federal Reserve’s interest rate policy. This, in turn, will influence US dollar demand and drive fresh movement in the GBP/USD pair. Ahead of the crucial data, a slight repositioning in the market has allowed the US dollar to recover some ground following its drop to its lowest level since mid-October, posing a temporary headwind for the British pound.
Despite this, any substantial appreciation of the US dollar remains uncertain due to widespread expectations that the Federal Reserve will implement multiple rate cuts this year, driven by concerns over a tariff-induced economic slowdown. Meanwhile, speculation that the Bank of England (BoE) will adopt a more measured approach to rate cuts compared to the Fed could support the British pound and provide a cushion for GBP/USD.
From a technical standpoint, last week’s decisive break above the 200-day Simple Moving Average (SMA) was seen as a bullish signal, reinforcing the notion that the pair’s overall trajectory remains upward. As a result, any corrective pullback is likely to be viewed as a buying opportunity, limiting further downside potential.
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