GBP/USD is trading around 1.2590 in the early Asian session on Wednesday, taking a break from recent gains. The US Producer Price Index (PPI) met expectations by rising 2.2% year-on-year in April, compared to a 1.8% increase in March. On the other hand, the UK Unemployment Rate increased to 4.3% and private-sector wage growth slowed.
The GBP/USD pair is consolidating above the 100-day Exponential Moving Average but struggling to break above the 1.2600 level. Market focus will be on the US Consumer Price Index and Retail Sales reports for April, as well as speeches by Fed officials Kashkari and Bowman.
The US PPI data showed a yearly increase of 2.2% in April, matching expectations. Core PPI, which excludes food and energy costs, also rose 2.4% year-on-year. The Fed sees the PPI data as a reason to maintain higher rates, but not necessarily to hike again. Cleveland Fed President Mester expressed interest in tapering asset purchases this year.
Investors are awaiting US CPI inflation data for further direction. Stronger-than-expected inflation could dampen expectations of a Fed rate cut and strengthen the USD against the GBP. In the UK, employment data suggested a cooling economy, raising speculation of a rate cut by the Bank of England in the coming months.
The BoE is expected to cut rates before the Fed, potentially weighing on the GBP/USD pair. Market sentiment points to a rate cut as early as June or August, which could limit upside potential for the Cable in the short term.