GBP/USD steadies near 1.2800 as traders expect BoE to maintain current interest rates

• GBP/USD maintains its position as the BoE is widely expected to keep rates unchanged in December.
• UK headline inflation has risen again after briefly dipping below the BoE’s 2% target.
• Traders adopt caution ahead of US Consumer Price Index data scheduled to be released on Wednesday.

GBP/USD extends its winning streak for the third successive session, trading around 1.2780 during the Asian hours on Wednesday. The Pound Sterling (GBP) gains support against its major peers as traders become increasingly confident that the Bank of England (BoE) will keep its interest rates unchanged at 4.75% in December’s monetary policy decision.

Most BoE officials are expected to vote to keep interest rates unchanged, as UK headline inflation has risen again after briefly dipping below the bank’s 2% target. The central bank had earlier predicted a rebound in inflation following its temporary alignment with the target range.

Traders are likely to focus on the UK’s October monthly Gross Domestic Product (GDP) and Industrial and Manufacturing Production data. Economists anticipate growth in factory output and GDP following declines in September.

The upside of the GBP/USD pair could be restrained as the US Dollar (USD) receives support from market caution, which could be attributed to the upcoming US Consumer Price Index (CPI) data release due on Wednesday. The US CPI inflation is estimated to rise to 2.7% YoY in November from 2.6% in October. Meanwhile, the core CPI, excluding Food & Energy, is expected to increase 3.3% YoY.

Any indications of stalled progress could significantly diminish the likelihood of a Federal Reserve’s (Fed) rate cut. However, markets are now pricing in nearly an 85.8% chance of Fed rate reductions by 25 basis points, according to the CME FedWatch Tool.