Key events today:

06:00 UTC: GBP – Consumer Price Index.

12:30 UTC: USD – Consumer Price Index.

The GBP/USD pair is declining during the Asian session on Wednesday, retreating from the two-week high in the 1.2870-1.2875 area reached the previous day. However, the decline remains contained as traders eagerly await the release of the latest consumer inflation data from the UK and the US.

The UK Consumer Price Index will play a crucial role in the Bank of England’s (BoE) monetary policy decision and is expected to support the British Pound (GBP). Additionally, the critical US CPI report will be closely monitored for signs that the Federal Reserve (Fed) is considering rate cuts, which in turn should provide a significant boost to the US Dollar (USD) and help determine the next directional move for the GBP/USD pair.

Ahead of the release of important macroeconomic data, the British Pound may continue to receive some support from Tuesday’s UK data, which showed an unexpected drop in the unemployment rate. This largely overshadowed the jump in the number of people claiming unemployment benefits by 135,000 in July and the sharp slowdown in wage growth from 5.7% y/y to 4.5% for the three months to June.

On the other hand, the US Dollar is undermined by expectations of further Fed rate cuts, supported by a softer-than-expected US Producer Price Index (PPI) on Tuesday. Additionally, the overall positive risk sentiment keeps dollar bulls on the defensive, which should provide a tailwind for the GBP/USD pair. Thus, any significant corrective decline may be seen as a buying opportunity and remain limited.

Recommendations: Watch the 1.2870 level; if it holds above, consider taking Buy positions. On a rebound, consider taking Sell positions.