Ella 
GBP/USD is trading above the psychological 1.2700 mark in early Asian trade on Friday. Better US GDP boosted GBP/USD. Markets are likely to turn cautious ahead of Friday night’s release of the Fed’s preferred inflation gauge, the Core Personal Consumption Expenditures price index. GBP/USD is currently trading around 1.2707, up 0.01% on the day.
On Thursday, U.S. gross domestic product (GDP) data for the fourth quarter of 2024 increased by 3.3% after growing by 4.9% in the third quarter, which was higher than expected by 2.0%. U.S. initial jobless claims rose by 25,000 to 214,000 in the week ended January 20 from 189,000 the previous week. Finally, new orders for durable goods stalled in December, with expectations at 1.1%.
Traders will get more clues from the core PCE price index for December. If this indicator continues to remain strong, future Fed fund pricing is likely to move closer to the Fed’s forecast of only cutting interest rates three times this year. This could therefore boost the US dollar and be bearish for GBP/USD.
The Bank of England (BOE) is widely expected to hold interest rates steady at 5.25% for the fourth consecutive time next week. Markets expect the Bank of England to cut interest rates in August. Investors expect the policy rate to fall by 175 basis points over the cycle, reaching 4.50% by December 2024 and 3.50% by mid-2025.
Next, traders will look to the UK’s GfK consumer confidence index for January. Later on Friday, focus will turn to the U.S. core personal consumption expenditures price index (Core PCE), which is expected to rise 0.2% on the month and 3.0% on the year. Traders will look to this data for GBP/USD trading opportunities.
