GBP/USD climbs back closer to 1.3100, gains look limited ahead of UK/US CPI data

• GBP/USD attracts some buyers on Wednesday amid modest decline in USD.
• The fundamental background warrants before placing optimistic aggressive bets.
• Traders may also prefer to wait for the release of the crucial US CPI report.

GBP/USD regains positive traction during the Asian session on Wednesday and climbs to a fresh daily high, closer to the 1.3100 round-digit mark in the last hour. Spot prices, however, remain below the overnight high, warranting some caution before positioning for any meaningful recovery from a three-week low around the 1.3050-1.3045 region reached the previous day.

The US dollar (USD) is stalling its positive trend seen over the past three days and retreating from the vicinity of the monthly top amid prospects of an imminent start to the Federal Reserve’s (Fed) policy easing cycle in September. This, in turn, is seen as a key factor providing support to the GBP/USD pair. That said, a generally weaker tone around equity markets could help limit losses for the greenback and limit the pair amid bets that the Bank of England (BoE) will announce more rate cuts this year.

The UK Office for National Statistics (ONS) reported on Tuesday that the number of people claiming unemployment benefits rose by 23.7 thousand in August, compared with 102.3 thousand previously and well below the 95.5 thousand expected. In addition, the IOM unemployment rate fell from 4.2% to 4.1% in the three months to July. That said, a slowdown in UK wage growth was seen as positive news for inflation and could give the UK central bank more confidence to cut interest rates further.

Traders may also refrain from placing aggressive bullish bets around the British pound (GBP) ahead of UK data, including the monthly GDP print and the latest US consumer inflation figures. The key US Consumer Price Index (CPI) report will play a key role in influencing market expectations of the Fed’s rate-cutting path. This, in turn, will boost USD demand in the short term and provide further directional impetus to the GBP/USD pair.