GBP/USD Holds Steady as Traders Await CPI and Central Bank Signals
GBP/USD traded within a tight range on Tuesday, hovering near 1.2747 as traders positioned ahead of key U.S. CPI data on Wednesday and upcoming Fed and BoE rate decisions. The pair’s price action remained constrained within a 1.2762-1.2726 range, as gilt yields kept pace with U.S. Treasury yields, providing little impetus for directional movement. Market expectations are for a slight rise in U.S. headline inflation and steady core readings, with SOFR futures pricing an 80% chance of a Fed rate cut on December 18. Conversely, the BoE is expected to hold rates steady on December 19, barring a significant deviation in UK inflation data. Sterling’s recent 2.3% recovery from November lows near 1.2475 reflects its relative yield advantage and insulation from potential U.S. tariffs.
Technical Analysis
Technically, GBP/USD bulls remain poised but require a break above the 200-day moving average at 1.2822 to extend momentum. Resistance levels include Tuesday’s high of 1.2766 and the November 12 high at 1.2874. A decisive close above 1.2822 would pave the way for a test of the 50% Fibonacci retracement of the 1.3434-1.2475 decline at 1.2955. Support lies at Tuesday’s low of 1.2725, followed by the 10-day moving average at 1.2714 and the 38.2% Fibonacci retracement at 1.2682. The pair’s ability to hold above key support levels suggests that sterling’s upward trajectory remains intact for now.
Market Outlook
Market participants will closely monitor Wednesday’s U.S. CPI report for clues on the Fed’s policy path. A softer-than-expected print could bolster GBP/USD by increasing Fed rate-cut expectations, while a stronger reading might reignite dollar strength, capping sterling gains. Additionally, BoE guidance and UK CPI data will play a pivotal role in shaping sterling’s medium-term outlook, with traders eyeing a potential breakout if bullish momentum resumes above 1.2822.