GBP/USD trades on a positive trend around the 1.3075 area with no tracking ahead of US CPI

• GBP/USD rises amid moderate USD price action, although upside appears limited.
• Expectations for more aggressive BoE policy easing are undermining the GBP amid a bullish USD.
• Bulls also appear reluctant ahead of Thursday’s release of US consumer inflation numbers.

GBP/USD is trading in a slight uptrend around the 1.3075 area during Thursday’s Asian session, although it lacks bullish conviction and remains within striking distance of a near-month low hit the previous day.

The US dollar (USD) is consolidating recent strong gains at its highest since August 16 and continues to get support from rising bets on a regular 25 basis point (bps) interest rate cut by the Federal Reserve ( Fed) in November. Expectations were reaffirmed by the minutes of the FOMC meeting released on Wednesday, which showed a consensus that excessive interest rate cuts will not lock the central bank into a specific pace for future cuts. This keeps the benchmark US 10-year bond yield elevated above the 4% mark or the July 31 high, which continues to support the greenback and acts as a headwind for the GBP/USD pair.

Meanwhile, remarks last week by Bank of England (BoE) Governor Andrew Bailey suggested the central bank could be moving to accelerate its rate-cutting cycle. This in turn could contribute to the relative underperformance of the British Pound (GBP) and limit any significant upside for the GBP/USD pair. Traders may also prefer to wait for the release of US consumer inflation figures, which, along with the US Producer Price Index (PPI) on Friday, could influence expectations of the Fed’s rate cut path. This, in turn, will boost USD demand in the short term and provide a significant boost to the currency pair.

Turning to key data risks, traders on Thursday could take cues from the BoE’s Credit Conditions Survey to take advantage of near-term opportunities. However, the fundamental context mentioned above suggests that the path of least resistance for the GBP/USD pair is to the downside, suggesting that any further move to the upside could still be seen as a selling opportunity. Spot prices look poised to extend the recent sharp pullback from the 1.3435 area, or the March 2022 high reached last month.