Important events today:

13:30 UTC – USD: GDP volume change for the quarter

15:30 UTC – USD: EIA Crude Oil Inventories Change

The GBP/USD pair is trading in a narrow range below the psychological 1.2700 mark in the early Asian session on Wednesday. Later in the day, US fourth quarter GDP growth data will be released.

On Tuesday, US durable goods orders for January fell 6.1% after a 0.3% decline in December, which was worse than the market’s forecast of a 4.5% drop. New orders for goods excluding the defense sector, an indicator of capital spending, rose +0.1% for the month, in line with expectations. Finally, the Conference Board’s US consumer confidence index came in at 106.7, below the market consensus forecast of 115.0.

Investors are betting that the first rate cut will occur at the June meeting, compared to expectations of a rate cut as early as March, according to CME FedWatch Tool data. The U.S. Personal Consumption Expenditures (PCE) index for January will be released on Thursday and may provide some hints on the trajectory of inflation over time. The PCE inflation rate is expected to rise 0.3% m/m in January, up from 0.2% in December.

On the other hand, Bank of England (BoE) Deputy Governor Dave Ramsden said on Tuesday that inflationary pressures remain and he needs more data on how long they will last before changing the BoE’s policy stance. The Bank of England forecasts inflation will return to its 2% target in the second quarter of 2024, but then rise to 2.75% later this year. Financial markets expect the UK central bank to start cutting interest rates in August.

Looking ahead, market participants will keep an eye on annualized U.S. gross domestic product data for the fourth quarter (Q4) and the preliminary merchandise trade balance. Traders will focus on the data and look for trading opportunities on the GBP/USD pair.

Recommendations: Watch the level of 1.2650, trade from it on the rebound.