GBP/USD trades in a narrow range below 1.2700, US GDP data looms

The GBP/USD pair trades in a tight range below the 1.2700 psychological mark during the early Asian session on Wednesday. The US GDP growth number for the fourth quarter will be due later in the day ahead of the Bank of England's (BoE)’s Catherine Mann speech. The major pair currently trades near 1.2685, up 0.03% on the day. 

On Tuesday, US January Durable Goods Orders fell 6.1% from a 0.3% drop in December, worse than the market estimation of a 4.5% decline. The Goods New Orders ex-defense, a proxy for capital spending, rose +0.1% MoM, in line with expectations. Finally, the US Consumer Confidence Index by the Conference Board came in at 106.7, below the market consensus of 115.0.

Investors bet that the first rate cut will come in the June meeting, down from expectations for a rate cut as early as March, according to the CME FedWatch Tool. The US Personal Consumption Expenditure Index (PCE) for January will be due on Thursday and might offer some hints about the trajectory of inflation over time. The PCE inflation figure is expected to rise 0.3% MoM in January from 0.2% in December. 

On the other hand, the Bank of England (BoE) Deputy Governor Dave Ramsden said on Tuesday that inflationary pressures persisted, and he needed more data about how long they were expected to last before changing the BoE's policy stance. The BoE forecasts that inflation will return to its 2% target in the second quarter of 2024 but will subsequently rise to around 2.75% later this year. The financial markets anticipate the UK central bank to begin cutting interest rates in August.

Looking ahead, market players will keep an eye on the US Gross Domestic Product Annualized for the fourth quarter (Q4) and preliminary Goods Trade Balance. Also, the Fed’s Bostic, Collins, Williams, and BoE’s Mann are set to speak later on Wednesday. Traders will take more cues from the data and find trading opportunities around the GBP/USD pair.