GBP/USD at 1.2550 Amid UK GDP and Fed DecisionGBP/USD exhibits a sideways trend as it braces for a slew of data releases from both the UK and the US, fluctuating around the 1.2550 level during the Asian trading session on Wednesday. The currency pair experienced notable volatility in the previous session, influenced by employment data from the UK and inflation figures from the US. Closing below 1.2550 in the 4-hour chart could expose the next support level at 1.2510-1.2500 (38.2% Fibonacci retracement of the latest uptrend, psychological level) before 1.2450-1.2440 (50% Fibonacci retracement, 200-period SMA).
On the upside, 1.2600 (psychological level, 100-period SMA, 50-period SMA, 23.6% Fibonacci retracement) is considered the first resistance level, followed by 1.2625 (static level) and 1.2700 (psychological level, static level). After rising to 1.2600 in the early European trading session on Tuesday, GBP/USD reversed course and dipped below 1.2550. US inflation data for November could trigger significant moves ahead of policy meetings by the Federal Reserve (Fed) and the Bank of England (BoE).
Annual wage inflation in the UK, measured by changes in Average Earnings including bonuses, sharply declined to 7.2% for the three months ending October from 8%. Average Earnings excluding bonuses increased by 7.3% in the same period, down from the previous 7.8%.
Although the BoE is anticipated to provide policy insights this week, soft wage inflation figures might encourage policymakers expressing concerns about robust wage growth, making it challenging to bring inflation back to the 2% target.
Reflecting the negative impact of this data on the British Pound, EUR/GBP has risen to the positive zone near 0.8600.
Towards the end of the day, market participants will closely monitor the Consumer Price Index (CPI) data from the US. On a monthly basis, core CPI, excluding volatile energy and food prices, is forecasted to rise by 0.3%. A weaker-than-expected core inflation report could pose challenges for the USD in finding demand and assist GBP/USD in finding support in the latter half of the day. Conversely, results in line with or higher than analyst estimates may lead to further depreciation of this currency pair.
