Ella 
In Asia on Wednesday, GBP/USD gave up the previous day’s gains and fell to around 1.2720. GBP/USD is under downward pressure ahead of a slew of UK economic data on Wednesday.
UK consumer price index (CPI), producer price index (PPI) and retail price index for November are due to be released later in the day. Monthly consumer inflation is expected to increase by 0.01% from the previous reading of unchanged 0.0%. However, annualized inflation is likely to be 4.4%, down from the previous reading of 4.6%.
The Bank of England kept its policy rate at a 15-year high of 5.25% at its December meeting. Market participants expect four rate cuts from June 2024, given the bleak economic outlook and looser labor market conditions. The expected interest rate path suggests the key rate could fall from 5.25% to 4.25% by the end of next year.
Sarah Breeden, deputy governor of the Bank of England, said on Tuesday that it was crucial for policy to remain restrictive in order to curb inflationary pressures. While she stressed that neither scenario represented a forecast, she noted that higher inflation was “obviously more costly.” Breeden’s remarks were consistent with comments from Governor Andrew Bailey, who also stressed the importance of maintaining restrictive policies.
The U.S. dollar index (DXY) fell in the previous trading day, with the U.S. dollar rising to around 102.20 at press time. The dollar is trying to recoup its recent losses after the Federal Reserve signaled a dovish tone that could ease monetary policy in early 2024.
U.S. housing starts exceeded expectations, reaching 1.56 million, beating expectations by 1.36 million. However, building permits fell slightly to 1.46 million, slightly below the estimate of 1.47 million. Investors are likely to focus on changes in existing home sales and the central bank’s consumer confidence survey on Wednesday.
