GBP/USD is trading sideways near 1.2710 in the early Asian session on Wednesday. The Federal Reserve officials are maintaining a cautious approach after April’s CPI inflation raised hopes for a rate cut. Bank of England’s Bailey has indicated that the next move on rates will be a cut, anticipating easing in April’s inflation data. The GBP/USD pair is awaiting fresh direction with the release of the UK Consumer Price Index and FOMC Minutes on Wednesday.
Fed Governor Christopher Waller recently stated that he does not see the need for further rate hikes and would require convincing data before supporting any cuts. Atlanta Fed President Raphael Bostic emphasized the need for caution in the first rate move, preferring to wait longer to ensure inflation remains stable.
Market expectations suggest the first rate cut by the Fed may not happen until September at the earliest, potentially boosting the US Dollar and limiting the GBP/USD pair’s upside in the short term. On the other hand, BoE Governor Andrew Bailey’s comments on a potential rate cut and expectations for a drop in April’s inflation data could impact the Pound Sterling. The upcoming UK CPI reports may influence the timing of the first rate cut, with higher figures potentially delaying the decision and providing support for the GBP.