GBP/USD posts modest gains above 1.2700, investors await US GDP data

• GBP/USD clings to mild gains near 1.2717 amid the USD softness. 
• The UK Flash Purchasing Managers Index (PMI) for January came in stronger than expected. 
• Former Fed’s Bullard said the central bank may begin cutting interest rates potentially as soon as March.
• The flash US Gross Domestic Product (GDP) for Q4 will be in the spotlight on Thursday. 

The GBP/USD pair posts modest gains during the early Asian trading hours on Thursday. The major pair reclaims above the 1.2700 mark on the back of the risk-on sentiment. Nonetheless, the release of the preliminary US GDP growth numbers for the fourth quarter (Q4) on Thursday might trigger volatility in the market. At press time, GBP/USD is trading at 1.2717, up 0.01% on the day.

On Wednesday, the UK Flash Purchasing Managers Index (PMI) for January came in stronger than expected, with Manufacturing PMI growing from 46.2 to 47.3 while the Services PMI climbed from 53.4 to 53.8. Finally, the S&P Global Composite PMI rose from 52.1 to 52.5, the highest in seven months. 

Investors anticipate the Bank of England (BoE) will begin its rate-cutting cycle at its August meeting. The markets have priced in rate cuts by 175 basis points (bps) through the cycle, reaching 4.50% by December 2024. 

On the other hand, former St. Louis Federal Reserve (Fed) President James Bullard said on Tuesday that the central bank may begin cutting interest rates potentially as soon as March, even if inflation has not hit the 2% target. 

Nonetheless, the US key events this week might convince the Fed about the further monetary policy path. The flash US Gross Domestic Product (GDP) for Q4 will be released later on Thursday. The GDP annualized figure for Q4 is forecast to expand by 2.0% from 4.9% in the previous reading.

Additionally, the US Core Personal Consumption Expenditures Price Index (Core PCE) for December will be due on Friday. The monthly and annual Core PCE figures are expected to show an increase of 0.2% MoM and 3.0% YoY. The figures could give a clear direction to the GBP/USD pair.