Markets await UK CPI, FOMC minutes

The GBPUSD pair remains confined around 1.2710 during Asian trading on Wednesday. Financial markets await fresh impetus, with the release of the UK Consumer Price Index (CPI) and FOMC Minutes due on Wednesday.

Federal Reserve Governor Christopher Waller, who has recently been hawkish, said on Tuesday that he did not think further rate hikes would be necessary, adding that he  needed some convincing data before backing cuts anytime soon.

Meanwhile, Atlanta Fed President Raphael Bostic noted that the US central bank has to be cautious about the first-rate move. Bostic further stated that he would “rather wait longer for a rate cut to be sure inflation does not start to bounce around.”

Fed officials remain cautious about the timing of interest rate cuts as the hotter-than-expected inflation data dampens the hope of easing policy.

Financial markets expect the first cut will happen in September at the earliest, with two reductions of a quarter percentage point before the end of the year, according to the CME Group’s FedWatch tool. This, in turn, might lift the Greenback and cap the upside of the pair’s upside in the near term.

On the other hand, Bank of England Governor Andrew Bailey said that “the next move on rates will be a cut,” adding that he expected a fall in the April inflation data.

The final reading of the headline UK Consumer Price Index is estimated to show an increase of 2.1% YoY in April, compared to 3.2% in the previous meeting. The core CPI inflation is projected to drop to 3.6% YoY in April from 4.2% in March.

These reports could have greater relevance in determining when the cycle’s first rate cut will occur. The hotter figures could delay the timing of a rate cut and provide some support to the Pound Sterling (GBP).

(Source: OANDA)