Ella 
During early Asian trading on Wednesday, GBP/USD was consolidating in a narrow range around 1.2490. The pair remains capped by the 1.2500 mark ahead of US economic data.
Data on Tuesday showed the unemployment rate rose more than expected, but the Bank of England remains concerned that wage growth will sustain persistent inflation. Data released by the British Office for National Statistics showed that the unemployment rate in the UK for the three months to July was 4.3%, compared with the previous value of 4.2%; the number of employed people decreased by 207,000 in July, compared with a decrease of 66,000 previously, which was a decrease than expected. A difference of 185,000. Average earnings, including bonuses, rose 8.5% in the three months to July, compared with 8.2% in the previous month. Excluding bonuses, the figure was still 7.8%, in line with expectations.
In addition, the UK’s gross domestic product (GDP) fell by 0.5% on a monthly basis in July, following an increase of 0.5% in June and a month-on-month decline of 0.2%, which was lower than expected. The pace of the economic slowdown has heightened concerns about a potential recession in the UK economy.
Bank of England (BOE) policymaker Catherine Mann said on Monday that it was too early for the central bank to pause raising interest rates and that it would be better for the central bank not to raise interest rates too high than to stop raising interest rates too early. However, Sterling (GBP) has attracted some sellers as investors worry about the impact of an aggressive tightening cycle on the UK economy.
Across the ocean, data released by the U.S. Bureau of Labor Statistics on Wednesday showed that the overall inflation rate in August hit the highest monthly increase in 14 months, with the U.S. Consumer Price Index (CPI) monthly 0.2% increased by 0.6%. The annual figure was 3.7%, above expectations of 3.2%. Core CPI, which excludes volatile food and energy prices, rose 0.3% month-on-month, up from 0.2% the previous month. Annual core CPI came in at 4.3%, compared with the previous reading of 4.7%.
Markets believe the Fed will keep interest rates unchanged at next week’s FOMC meeting. However, these data mean the Fed should be wary of another acceleration in inflation in the coming months. Investors have put a 97% chance of keeping rates unchanged at 5.25%-5.50% in September, according to the CME Fedwatch tool. However, the likelihood of a rate hike at the November meeting rose to 49.2%.
In the absence of UK economic data on Wednesday, GBP/USD remains influenced by USD price dynamics. Market participants will be closely watching U.S. weekly jobless claims, producer price index (PPI) and monthly retail sales data due later in the day. A preliminary reading of Michigan’s consumer confidence index for September will be released on Friday. The data will provide direction for GBP/USD and traders will be looking to trade the pair.
