Key events today:

18:00 UTC: USD – Release of the FOMC meeting minutes.

The GBP/USD pair remains near the 1.2710 mark in the early Asian session on Wednesday. Bank of England (BoE) Governor Andrew Bailey stated that “the next step in terms of rates will be a reduction,” adding that he expects April’s inflation data to decline. The final value of the UK’s core Consumer Price Index is estimated to show a year-over-year increase of 2.1% in April, compared to 3.2% in the previous session. The core CPI is forecasted to drop to 3.6% year-over-year in April from 4.2% in March. These reports could be crucial in timing the first rate cut in the cycle. Higher figures could delay the timing of the rate cut and provide some support to the British pound (GBP).

On the other hand, Federal Reserve (Fed) Governor Christopher Waller, who has been hawkish lately, stated on Tuesday that he does not see a need for further rate hikes, adding that he would need compelling data before he supports a rate cut in the near future. Meanwhile, Atlanta Fed President Raphael Bostic noted that the US central bank should be cautious about the first rate hike. Bostic also mentioned that he “would prefer to wait longer with the rate cut to be sure that inflation does not start to jump.”

Fed officials remain cautious about the timing of interest rate cuts as higher-than-expected inflation data dampens hopes for policy easing. Financial markets anticipate the first rate cut no earlier than September, with two more quarter-point cuts expected by the end of the year, according to CME Group’s FedWatch tool. This, in turn, could lead to a rise in the US dollar rate and limit the growth of the pair in the near future.

Recommendations: Predominantly buy orders from the current price level.