GBP/USD consolidates mid-1.3000s, looks vulnerable ahead of UK data

• GBP/USD draws support due to subdued USD demand, although bulls remain on the sidelines.
• Expectations for more aggressive BoE policy easing are undermining GBP and capping the major.
• Traders are now looking to the UK data warehouse for a short-term boost ahead of the US PPI report.

GBP/USD is struggling to capitalize on the previous day’s modest rebound from the 1.3020 area or one-month low and is trading in a narrow band during the Asian session on Friday. Spot prices are currently hovering around the mid-1.3000s, unchanged for the day and looking vulnerable to an extension of the recent pullback slide from the March 2022 high reached last month.

US initial jobless claims data released on Thursday indicated signs of weakness in the US labor market and suggested the Federal Reserve (Fed) will continue to cut interest rates. This keeps the US dollar (USD) on the defensive below its mid-August high and provides support to the GBP/USD pair. That said, investors seem to have completely ruled out the possibility of more aggressive policy easing by the Fed. Expectations were reaffirmed by the minutes of the September FOMC meeting and stronger-than-expected numbers on US consumer inflation.

Apart from this, lingering geopolitical risks stemming from the ongoing conflicts in the Middle East act as a tailwind for the safe-haven Greenback and limit upside for the GBP/USD pair. In the latest development, the Israeli military said it had killed the top commander of the Palestinian militant group Islamic Jihad in the Nur Shams refugee camp in the occupied West Bank. This, along with the market’s belief that the Bank of England (BoE) may be moving towards accelerating its rate-cutting cycle, could continue to undercut the pound and keep a lid on the currency pair.

Market participants are now looking forward to the UK macro data warehouse, including the monthly GDP print, for some impetus. However, the focus will remain on the US Producer Price Index (PPI), due later in the North American session. Apart from this, the US economic file features the release of the preliminary index of Michigan consumer sentiment and inflation expectations. This, along with speeches from influential FOMC members, will boost USD demand and allow traders to take advantage of short-term opportunities around the GBP/USD pair on the final day of the week.