Ella 
In early Asian trade on Wednesday, GBP/USD was in bearish territory for the fifth day in a row. Investors are awaiting UK consumer price index (CPI) inflation data for February and the Federal Reserve’s (FED) interest rate decision on Wednesday. The Fed is expected to keep interest rates steady for the fifth consecutive time at its March meeting. GBP/USD is currently trading around 1.2719, down 0.01% on the day.
The Fed is expected to keep its benchmark interest rate in a range of 5.25% to 5.5% on Wednesday. Federal Reserve Chairman Powell pointed out that cutting interest rates too early could trigger a rebound in inflation and cause more pain to consumers. The Fed is likely to maintain forward guidance and emphasize that it needs more evidence that inflation is on a sustainable path toward its 2% target before cutting rates. Fading bets on expectations of a rate cut from the Federal Reserve could boost the dollar in the short term and limit upside for GBP/USD.
On the other hand, the UK inflation report released later in the day may provide some hints on whether the Bank of England (BoE) will signal the timing of its first interest rate cut or maintain interest rates at a higher level for longer. UK headline inflation is expected to rise 3.6% monthly in February from 4.0% in January, while annual core inflation will fall to 4.6% in February from 5.1% in January. Stronger-than-expected UK inflation data could convince the Bank of England to keep interest rates higher for longer, boosting GBP/USD.
Traders will keep a close eye on UK February inflation due on Wednesday ahead of the Fed’s interest rate decision. After the meeting, the focus will turn to Fed Chairman Powell’s press conference and economic forecasts. The Bank of England’s interest rate decision on Thursday will be closely watched. These events will provide direction for the GBP/USD pair.
