Key events today:

06:00 UTC: GBP – Consumer Price Index.

18:00 UTC: USD – FOMC decision on the main interest rate.

On Tuesday, the GBP/USD pair kicked off a two-day winning streak, gaining 0.2% and briefly returning to the 1.2700 level. The cable is recovering from last week’s losses to stabilize in the short term as traders prepare for significant year-end events, including meetings of the Federal Reserve (Fed) and the Bank of England (BoE), as well as the latest UK Consumer Price Index (CPI) inflation data.

On Tuesday, U.S. retail sales data showed a 0.7% monthly increase, raising mild concerns among investors that the Fed may not need to adopt an aggressive rate-cutting strategy, especially given the recent uptick in inflation metrics. Despite this, markets still largely price in a third consecutive Fed rate cut on Wednesday, with a 95% probability of a 25-basis-point reduction, according to CME’s FedWatch tool.

UK CPI inflation in November is expected to decline to 0.1% month-on-month after a 0.6% rise in October. However, core inflation remains resilient, with forecasts suggesting a November core CPI of 3.6%, up from 3.3% in the previous period. Following the CPI release on Wednesday, the Bank of England will hold its final rate meeting of 2024 on Thursday. Analysts generally expect the Bank of England to vote eight to one to keep the main policy rate unchanged until the end of the year.

Recommendations: Watch the 1.2700 level, primarily trading Buy orders.