GBP/USD consolidates in a range around mid-1.2800s, looks to BoE for fresh impetus

The GBP/USD pair struggles to capitalize on the previous day's post-FOMC positive move and oscillates in a narrow trading band during the Asian session on Thursday. Spot prices currently trade around mid-1.2800s, nearly unchanged for the day as traders opt to wait on the sidelines ahead of the Bank of England (BoE) policy update.

Signs that inflationary pressures are receding globally have been fueling speculations that the UK central bank will cut interest rates later today. In fact, financial markets are pricing in over a 65% chance that the BoE will lower rates from a 16-year high of 5.25% and expect one more quarter-point cut before the end of the year. This, in turn, is seen acting as a headwind for the British Pound (GBP) and acting as a headwind for the GBP/USD pair. 

Investors, however, are far from certain that the BoE will act immediately as services inflation in the UK remains uncomfortably high. This, in turn, holds back traders from placing fresh directional bets around the GBP/USD pair and leads to subdued range-bound price action. Hence, the focus will remain on the accompanying monetary policy statement and BoE Governor Andrew Bailey's comments at the post-meeting press conference. 

Heading into the key central bank event risk, the post-FOMC US Dollar (USD) selling bias continues to offer some support to the GBP/USD pair and should help limit the downside. The US central bank acknowledged the recent progress on inflation and cooling in the labor market. Furthermore, Fed Chair Jerome Powell signaled the likelihood of an early rate cut if inflation stays in line with expectations and dragged the US Treasury bond yields lower. 

In fact, the yield on the benchmark 10-year US government bond dives to its lowest level since February. Apart from this, the risk-on impulse – as depicted by a generally positive tone across the global equity markets – keeps the safe-haven USD depressed near a three-week low, which, in turn, is seen lending support to the GBP/USD pair.