Ella 
In the Asian market on Wednesday, GBP/USD rose, but lacked follow-up and remained within the range of last week. GBP/USD is currently trading around the psychological 1.2500 mark, still within striking distance of the three-month low hit last Thursday.
The dollar fluctuated near weekly lows, becoming a key factor in the rise of GBP/USD, but expectations that the Bank of England (BoE) interest rate hike cycle is nearing the end provided resistance to the upward trend. Bank of England Governor Andrew Bailey told lawmakers last week that the bank was close to ending its streak of rate hikes. Separately, a breakdown of UK employment data released on Tuesday showed the labor market is cooling, suggesting the Bank of England will not raise interest rates again after a widely expected hike in September.
On the other hand, the Federal Reserve (Fed) is expected to pause raising interest rates at next week’s policy meeting. However, markets still believe the Fed is likely to raise interest rates by 25 basis points before the end of the year. That bet was reaffirmed by upbeat U.S. macro data released last week, which suggested a vibrant U.S. economy. Additionally, the fact that inflation is not cooling fast enough should allow the Fed to keep interest rates higher for longer. Therefore, market focus remains on U.S. inflation data to be released later today, which will provide new signals for the Federal Reserve’s path to raising interest rates in the future.
At the same time, the prospect of further policy tightening by the Federal Reserve remains supportive of rising U.S. bond yields. This, coupled with the generally cautious sentiment remaining in the market, should act as a “tailwind” for the safe-haven USD and help prevent any significant gains in GBP/USD. Investor targets are looking ahead to the release of UK macro data, including GDP end-of-month data, in order to capture short-term trading opportunities during the European session. At the same time, fundamentals also suggest that bulls need to remain cautious.
