GBP/USD consolidates in range above mid-1.2700s ahead of UK and US inflation data

• GBP/USD struggles to attract buyers ahead of crucial UK and US inflation data.
• A combination of factors is keeping USD bulls on the defensive and providing support to the pair.
• The fundamental backdrop supports the prospects for an extension of a one-week uptrend.

The GBP/USD pair is lower during the Asian session on Wednesday and is moving away from a more than two-week high around the 1.2870-1.2875 region reached the previous day. However, the downside remains cushioned as traders eagerly await the release of the latest UK and US consumer inflation figures.

The UK CPI will play a key role in influencing the Bank of England’s (BoE) monetary policy decision and will drive the British Pound (GBP). Apart from this, the key US CPI report will be scrutinized for indications of the Federal Reserve’s (Fed) interest rate cut trajectory, which in turn should provide a significant boost to the US dollar ( USD) and help determine the next stage of a directional move for the GBP/USD pair.

Ahead of high-impact macroeconomic data, the GBP could continue to receive support from Tuesday’s UK data showing a surprise drop in the unemployment rate. That, to a greater extent, overshadowed a rise in the number of people filing for unemployment benefits, by 135,000 in July, and a sharp deceleration in wage growth, from a rate of 5.7 percent a year to 4 .5% during the three months until June.

The USD, on the other hand, is undercut by expectations for more interest rate cuts by the Fed, supported by a weaker-than-expected US Producer Price Index (PPI) on Tuesday. Apart from this, a generally positive risk tone is keeping USD bulls on the defensive and should act as a tailwind for GBP/USD. Therefore, any significant corrective slide could be seen as a buying opportunity and remain limited.