GBP/USD struggles to gain ground above the 1.2800 mark, UK GDP data eyed

The GBP/USD pair holds below the 1.2800 psychological barrier during the early Asian trading hours on Wednesday. The firmer US Dollar (USD) after the US February CPI inflation data drags the major pair lower. Investor. Investors await the UK GDP growth number for January, which is forecast to grow by 0.2% MoM. GBP/USD currently trades around 1.2795, adding 0.02% on the day.

US inflation, as measured by the Consumer Price Index (CPI), rose 0.4% MoM and 3.2% YoY in February, the Bureau of Labor Statistics revealed on Tuesday. The monthly CPI figure was in line with expectations, while the annual figure was above the market consensus of 3.1%. The Core CPI, excluding volatile food and energy prices, climbed 0.4% MoM and 3.8% YoY, beating the estimation. 

The stronger-than-expected CPI inflation data might convince Federal Reserve (Fed) policymakers to wait at least until the summer before starting to lower interest rates. Fed officials emphasized in recent weeks that rate cuts are likely at some point this year, but they caution about reacting too soon in the battle against high prices. Investors will take more cues from the February Retail Sales on Thursday, which is expected to rise 0.8% MoM. The strong Retail Sales data might prompt some further repricing of anticipation following the February CPI inflation report.

Data released from the Office for National Statistics (ONS) reported on Tuesday that the annual rate of wage growth in the United Kingdom (UK) is falling. The UK Average Earnings Including Bonuses from November last year to January 2024 eased to 5.6% from 5.8% in the previous reading, while annual wage growth excluding bonuses dropped to 6.1% versus 6.2% prior. In response to the data, the bets for the Bank of England (BoE) rate cuts this year increased marginally, and traders expect three rate cuts this year. 

Moving on, traders will keep an eye on the UK monthly Gross Domestic Product for January, Construction Output, Goods Trade Balance, Industrial Production, and Manufacturing Production, due on Wednesday. On Thursday, US Retail Sales for February will be in the spotlight.