- GBP/USD lacks any firm intraday direction and oscillates in a range on Wednesday.
- The fundamental backdrop warrants some caution for aggressive bearish traders.
- Traders opt to wait for the UK November CPI report and the crucial FOMC decision.
The GBP/USD pair struggles to capitalize on a two-day-old recovery move from the vicinity of the 1.2600 mark, or a three-week low touched on Monday and oscillates in a narrow band during the Asian session. Spot prices currently trade around the 1.2700 round figure, nearly unchanged for the day as traders keenly await the outcome of the highly-anticipated FOMC policy meeting before placing fresh directional bets.
The Federal Reserve (Fed) is widely expected to lower borrowing costs by 25 basis points and adopt a more cautious stance on cutting interest rates going forward. Hence, investors will closely scrutinize the so-called dot plot and Fed Chair Jerome Powell's comments at the post-meeting press conference for cues about the future rate-cut path. This, in turn, will influence the near-term US Dollar (USD) price dynamics and provide some meaningful impetus to the GBP/USD pair.
Meanwhile, the prospects for a less dovish Fed, along with speculations that US President-elect Donald Trump's policies may lead to an increase in government borrowing and boost inflation, remain supportive of elevated US Treasury bond yields. Apart from this, persistent geopolitical risks and trade war fears continue to act as a tailwind for the USD, which, in turn, seems to cap the GBP/USD pair, though reduced bets for a rate cut by the Bank of England (BoE) lend support.
The monthly UK jobs report released on Tuesday showed that regular pay grew at a faster-than-expected annual pace of 5.2% between August and October. The data justifies the need for the BoE to keep rates on hold at its meeting this week and also forced investors to trim their bets for three 25 basis points rate reductions next year. This could underpin the British Pound (GBP) and limit losses for the GBP/USD pair ahead of the UK consumer inflation figures later today.
Economic Indicator
Consumer Price Index (YoY)
The United Kingdom (UK) Consumer Price Index (CPI), released by the Office for National Statistics on a monthly basis, is a measure of consumer price inflation – the rate at which the prices of goods and services bought by households rise or fall – produced to international standards. It is the inflation measure used in the government’s target. The YoY reading compares prices in the reference month to a year earlier. Generally, a high reading is seen as bullish for the Pound Sterling (GBP), while a low reading is seen as bearish.
Read more.Next release: Wed Dec 18, 2024 07:00
Frequency: Monthly
Consensus: -
Previous: 2.3%
Source: Office for National Statistics
The Bank of England is tasked with keeping inflation, as measured by the headline Consumer Price Index (CPI) at around 2%, giving the monthly release its importance. An increase in inflation implies a quicker and sooner increase of interest rates or the reduction of bond-buying by the BOE, which means squeezing the supply of pounds. Conversely, a drop in the pace of price rises indicates looser monetary policy. A higher-than-expected result tends to be GBP bullish.
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GBP/USD holds steady near 1.2700 after UK inflation data
GBP/USD lacks any firm intraday direction and oscillates in a range near 1.2700 on Wednesday. The data from the UK showed that the annual CPI inflation rose to 2.6% in November from 2.3%, as expected. Investors gear up for the Fed's monetary policy announcements.
EUR/USD strengthens above 1.0500, all eyes are on Fed rate decision
The EUR/USD pair holds positive ground to near 1.0505 during the early European session on Wednesday. However, the cautious sentiment ahead of the Federal Reserve interest rate decision meeting could weigh on riskier assets like the Euro.
Gold price extends the range play as traders keenly await Fed rate decision
Gold price remains depressed through the first half of the European session on Wednesday, albeit it lacks follow-through selling and so far, has held above a one-week low touched the previous day.
Bitcoin, Ethereum and Ripple show signs of short-term correction
Bitcoin price edges slightly down during the Asian session on Wednesday. Ethereum and Ripple followed BTC’s footsteps and declined slightly; all coins’ technical indicators and price action suggest a possible short-term correction on the cards.
DJIA ends Tuesday in the red, sheds roughly 270 points
The Dow Jones Industrial Average shed another 360 points at its lowest on Tuesday as losses accumulate in the key index and begin to gather speed. The S&P 500 and the Nasdaq also closed in the red.
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