Pound Sterling consolidates its uptrend as fresh catalysts awaited

Early on Tuesday’s the Asian session, the GBP/USD pair is trading slightly in the green near 1.2770. In response to the Fed’s hawkish remarks and the positive US statistics, traders reduce their bets on interest rate reductions by the Fed.

The GBP could rise if the BoE decides to hold off on raising the rate. The GBP/USD pair, which hit two-month highs during Tuesday’s early Asian session, is consolidating its gains around 1.2770. The major pair finds some support at about 104.60, where the USD Index (DXY) is still under some selling pressure. Traders are anticipating the Consumer Confidence report from the US Conference Board, the FHFA House Price Index, and the speeches by Lisa Cook, Mary Daly, and Neel Kashkari from the Fed later on Tuesday.

According to the CME FedWatch tool, the markets are reducing their bets on interest rate cuts by the US Federal Reserve (Fed), with a 49% possibility of rate cuts in September, down from a 63% chance one week earlier.

This week’s important US data could provide some cues on the direction of inflation and the economy. Prior to the release of the US Core Personal Consumption Expenditures Price Index (Core CPE), the preferred inflation indicator of the Federal Reserve, the first reading of the US GDP economic growth for the first quarter is scheduled for this Thursday. In the short run, the stronger-than-expected US inflation figures could support the USD and weaken the GBP/USD.

The Pound Sterling (GBP), on the other hand, gains traction as investors believe the Bank of England (BoE) will keep interest rates low for an extended period of time in an effort to reduce inflation. According to Citigroup strategist Jamie Searle, the July UK election “lowers the risk of a later election interfering with the BOE cycle and focusing only on data-dependency,” which further reduces the likelihood of a near-term BOE decrease.