GBP/USD Forecast: USD struggles ahead of FOMC decision, UK CPI eyed for some impetus

The GBP/USD pair had good two-way moves on Tuesday and was solely influenced by the US Dollar price dynamics. Despite the latest UK political development, wherein the opposition Labour Party leader, Jeremy Corbyn plans to bring a vote of no-confidence against the UK PM May, a strong follow-through USD selling helped the pair to catch some aggressive bids. 

Growing bets that concerns over the global growth outlook might prompt the Fed to signal a possible slowdown, or even a pause, to its rate hike cycle in 2019. The same was evident from the ongoing slide in the US Treasury bond yields and kept exerting downward pressure on the greenback. The positive momentum lifted the pair beyond the key 200-hour SMA barrier to over one-week tops, around the 1.2700 handle.

Meanwhile, a late USD rebound, supported by upbeat US housing market data, kept a lid on any strong follow-through, albeit the pair still managed to end the day with modest gains. The USD bulls, however, struggled to shake off market expectations over a slower pace of the Fed policy tightening cycle and assisted the pair to regain positive traction during the Asian session on Wednesday. 

Today's economic docket highlights the release of the latest UK inflation figures for November, with the headline and core CPI anticipated to ease to 2.3% and 1.8% y/y rate, respectively. The key focus, however, will be on the latest FOMC monetary policy update, due later in the day. The monetary policy update will be accompanied by updated economic projections, which will be closely scrutinized for some fresh insights over the Fed's policy guidance for 2019 and eventually determine the greenback's next leg of a directional move.

From a technical perspective, overnight near-term bullish breakout and a subsequent rebound from the said resistance break-point now support prospects for an extension of the positive momentum. Hence, a move back above the 1.2700 handle, towards testing the 1.2725-30 supply zone, now looks a distinct possibility. A follow-through buying might now assist the pair to surpass the 1.2770-75 intermediate resistance and aim towards reclaiming the 1.2800 round figure mark.

On the flip side, the mentioned 200-hour SMA, currently near the 1.2630 region, which is followed by the trend-line resistance break-point, around the 1.2610-1.2600 region now seems to protect the immediate downside. A sustained weakness below the said supports might negate the constructive outlook and turn the pair vulnerable to slide back towards testing the 1.2540-35 intermediate support en-route the key 1.2500 psychological mark.