GBP/USD trades near mid-1.26s as markets get ready for Fed
- Inflation data from the UK met expectations on Wednesday.
- US Dollar Index steadies in the 96.60 - 70 region.
- The Fed is expected to hike the policy rate by 25 basis points.
After dropping toward the 1.26 handle in the early NA session, the GBP/USD pair took advantage of the USD weakness and retraced its daily losses to turn positive on the day above 1.2650. As of writing, the pair was up 0.1% at 1.2653.
Earlier today, the data released by the UK's Office for National Statistics showed that the consumer price index (CPI) in November rose 0.2% on a monthly basis to bring the annual rate down to 2.3% from 2.4%. Additionally, the core CPI, which excludes food and energy prices, ticked down to 1.8% on a yearly basis to match experts' forecasts. With these readings not surprising the markets, the GBP's reaction was relatively muted.
On the other hand, the greenback came under modest selling pressure in the second half of the day and extended its decline to a fresh 9-day low at 96.55. Although there were no fundamental drivers behind that move, investors seemed to be selling off their dollars ahead of the Fed's announcement regarding the interest rate and the monetary policy outlook. As we approach the crunch time, the US Dollar Index is down 0.35% on the day at 96.65.
- US: Existing home sales increased 1.9% in November vs. -0.6% expected.
- US: Current account deficit increased to $124.8 billion in Q3.
- FOMC Preview: What 9 major banks are expecting from December meeting?
Technical levels to consider
The pair could face the initial resistance at 1.2680 (daily high/20-DMA) ahead of 1.2760 (Dec. 10 high) and 1.2810 (50-DMA). On the downside, supports are located at 1.2605 (daily low), 1.2530 (Dec. 14 low) and 1.2475 (Dec. 12 low).