Key Events Today:

06:00 UTC: USD – Consumer Price Index.

The GBP/USD pair struggled to make significant gains on Wednesday, oscillating within a narrow trading range around the psychological level of 1.2700 during the Asian session. Spot prices, meanwhile, held above last Friday’s one-month low as traders eagerly await the latest UK consumer inflation data before positioning for the next directional move.

It is expected that the UK Consumer Price Index (CPI) in May will increase by 0.4% compared to the previous 0.3%, while the year-on-year figure is forecasted to slow down to 3.5% from April’s 3.9%. These data points will play a crucial role in influencing the British Pound (GBP) and providing some momentum to the GBP/USD pair. Market attention will then shift to the Bank of England (BoE) monetary policy meeting on Thursday, which will help determine the near-term trajectory of the currency pair.

Ahead of key data/risks related to central bank events, subdued price dynamics in the US Dollar (USD) have been a key supportive factor for the GBP/USD pair. Tuesday’s softer-than-expected US retail sales report indicated signs of consumer fatigue and bolstered expectations that the Federal Reserve (Fed) may start cutting interest rates in September. This led to a nightly decline in US Treasury yields and is believed to have undermined the Dollar.

The aforementioned fundamental backdrop supports prospects for a significant strengthening of the GBP/USD pair. However, the lack of follow-through buying necessitates some caution before positioning for further recovery from the mid-1.2600 levels or last Friday’s one-month low.

Recommendations: Trading predominantly with Buy orders from the current price level.