Key events today:

06:00 UTC: GBP – Consumer Price Index (CPI).

The GBP/USD pair continues to strengthen for the third consecutive session, trading around 1.2690 during Asian hours on Wednesday. The British pound (GBP) is gaining momentum as markets estimate less than a 20% chance of another rate cut by the Bank of England (BoE) this year, following Tuesday’s BoE Monetary Policy Report hearings where the central bank described interest rates as “moderately restrictive.”

On Wednesday, traders are focused on key UK data, including the Consumer Price Index (CPI) and Retail Price Index (RPI) for October. These figures could influence the Bank of England’s decision on whether to proceed with further rate cuts this year.

UK CPI inflation for October is forecast to rise to 2.2% year-on-year, up from 1.7% the previous month. Monthly CPI for October is expected to increase by 0.5%, compared to 0.0% in September. Additionally, the Retail Price Index (RPI) is anticipated to climb to 3.4%, compared to 2.7% previously.

The US dollar (USD) remained steady on Wednesday after three consecutive days of losses driven by weaker-than-expected economic data released on Tuesday. However, the dollar’s decline may be limited as investors anticipate pro-inflationary policies from the incoming Trump administration, such as tax cuts and tariff hikes. These measures could lead to higher inflation, potentially forcing the Federal Reserve to slow down its rate-cutting pace.

Kansas City Fed President Jeffrey Schmid stated on Tuesday that he expects inflation and employment to approach the Fed’s targets. Schmid explained that rate cuts reflect the central bank’s confidence that inflation will reach its 2% target. He also noted that while a large budget deficit might not directly cause inflation, the Fed may need to respond to emerging inflationary pressures by raising interest rates.

Recommendations: Monitor the 1.2700 level. Consider Buy positions if it holds above this level, and Sell positions if a pullback occurs.