GBP/USD holds below the 1.2600 mark ahead of UK PPI, CPI data

The GBP/USD pair loses traction below 1.2600 during the early Asian trading hours on Wednesday. The major pair flirted with the key 100-day EMA near 1.2573 amid the firmer US Dollar (USD) and the upbeat US inflation data. Investors will take more cues from the UK January inflation data on Wednesday. At press time, GBP/USD is trading at 1.2589, unchanged for the day. 

The US inflation data, as measured by the Consumer Price Index (CPI), came in above expectations, with a core CPI rose by 0.4% MoM while headline inflation was up 0.3% MoM. The report highlights the risks of higher underlying inflation in the United States and reduces the probability of a rate cut next month. Atlanta Federal Reserve (Fed) President Raphael Bostic said the rate cuts in the next few months are unlikely. Bostic added that he expected inflation to be near 2% by the end of 2024.

The UK Wage growth slowed less than estimated in the fourth quarter of 2023, highlighting the need for the Bank of England (BoE) to wait before lowering the interest rates. Data from the Office for National Statistics on Tuesday showed that Average Earnings excluding bonuses rose 6.2% from a year earlier, down from an upwardly revised 6.7% in the three months through November, better than the expectation of 6.0%. Wage Including bonuses, eased to 5.8% from 6.7% in the three months to November, above the market consensus of 5.6%.

Money markets have priced in a 60% odds of the first rate cuts from the BoE in the June meeting, down from a 75% chance before the labor market data’s release. 

The UK Producer Price Index (PPI) and CPI data for January will be the highlights on Wednesday. On Thursday, the highlight will turn to the UK Gross Domestic Product (GDP) for the fourth quarter and the US January Retail Sales. Traders will take cues from these events and find trading opportunities around the GBP/USD pair.