GBP/USD oscillates in a narrow range around 1.2490, US data eyed

The GBP/USD pair consolidates in a narrow range around 1.2490 during the early Asian session on Wednesday. The major pair remains capped by the 1.2500 barrier ahead of the US economic data released.

Tuesday's data indicated a bigger rise in the unemployment rate than anticipated, but the BoE remains concerned that wage growth will sustain persistent inflation. The UK’s Office for National Statistics revealed that the UK Unemployment Rate in the three months to July came in at 4.3% from 4.2% in the previous reading, Meanwhile, Employment Change for July declined by 207K from a 66K drop in the previous reading, worse than the estimated 185K drop. The Average Earnings Including Bonus in the three months to July rose by 8.5% versus 8.2% prior. Excluding bonus, the figure remains at 7.8%, as expected.

Additionally, the UK Gross Domestic Product (GDP) declined 0.5% MoM in July, following a 0.5% expansion in June and a worse-than-expectation 0.2% drop. The speed of the slowdown fuels the concern about the potential recession in the UK economy.

Catherine Mann, a Bank of England (BoE) policymaker, stated on Monday that it was too early for the central bank to pause interest rates and that it was preferable for the central bank to err on the side of raising them too high rather than halting too soon. However, The British Pound (GBP) attracts some sellers as investors are concerned about the aggressive tightening cycle that will impact the UK economy.

Across the pond, the US Bureau of Labor Statistics showed on Wednesday that the headline inflation in August hit the highest monthly gain in 14 months with the US Consumer Price Index (CPI) rising 0.6% MoM from 0.2% in the previous reading. The annual figure came in at 3.7% from 3.2%, better than expected. The core CPI, which excludes volatile food and energy prices climbed 0.3% MoM from 0.2% in the previous month. The annual core CPI came in at 4.3% versus 4.7% prior.

Markets believe that the Federal Reserve (Fed) will hold interest rates unchanged at next week's FOMC meeting. However, the figures imply that the Fed should be on the lookout for any re-acceleration in inflation in the next months. According to the CME Fedwatch Tool, investors have priced in 97% odds of interest rate unchanged in September at 5.25%-5.50%. However, the possibility of a rate hike in the November meeting increased to 49.2%.

In the absence of economic data released from the UK docket on Wednesday, the GBP/USD pair remains at the mercy of USD price dynamics. Market participants will keep an eye on the release of the US weekly Initial Jobless Claims, the Producer Price Index (PPI) and monthly Retail Sales due later in the day. On Friday, the preliminary Michigan Consumer Sentiment Index for September will be due. These figures could give a clear direction to GBP/USD and traders will find the trading opportunities around the major pair.