GBP/USD Forecast: Pound Sterling could struggle to extend rebound ahead of UK inflation data

After closing the second consecutive trading day in negative territory on Monday, GBP/USD found a foothold early Tuesday and stabilized above 1.2650. Ahead of the UK November inflation data on Wednesday, the pair could have a hard time gathering recovery momentum.

Despite the modest improvement seen in risk mood in the second half of the day on Monday, GBP/USD failed to gain traction as investors remained reluctant to increase Pound Sterling longs. Annual inflation in the UK, as measured by the change in the Consumer Price Index (CPI) is forecast to decline to 4.4% in November from 4.6% in October. 

While delivering a speech at the London Business School on Monday, Bank of England (BoE) Deputy Governor Ben Broadbent explained that policymakers will have to be patient to see a steady decline in wage inflation. These comments, however, had little to no impact on GBP/USD.

In the meantime, comments from Federal Reserve (Fed) officials painted a mixed picture regarding the policy outlook, limiting USD gains. San Francisco Fed President Mary Daly told the Wall Street Journal that rate cuts will be needed next year to prevent over-tightening but Cleveland Fed President said that markets were a 'bit ahead' of the Fed on rate cuts.

GBP/USD Technical Analysis

GBP/USD is facing immediate resistance at 1.2680, where the lower limit of the long-term ascending regression channel is located. Once the pair confirms that level as support, it could face interim hurdle at 1.2700 (psychological level, static level) before targeting 1.2750 (mid-point of the ascending channel). 

On the downside, 1.2630 (100-period Simple Moving Average (SMA), 50-period SMA), aligns as first support before 1.2600 (psychological level, static level) and 1.2550 (static level).