Pound Sterling ranges against USD ahead of US heavy-data day

The Pound Sterling consolidates below 1.2600 against the US Dollar as investors await a string of US economic data, including PCE inflation.

The FOMC minutes failed to offer meaningful cues about the interest rate path.

BoE Lombardelli wants to see evidence of a slowdown in inflation before backing an interest rate cut.

The Pound Sterling (GBP) trades in a very tight range below 1.2600 against the US Dollar (USD) in Wednesday’s London session. The GBP/USD pair consolidates as the US Dollar is sidelined ahead of the United States (US) Personal Consumption Expenditure Price Index (PCE) data for October, which will be published at 13:30 GMT.

Economists expect the core PCE inflation data – which excludes volatile food and energy prices – to have accelerated to 2.8% from 2.7% in September on year, with monthly figures growing steadily by 0.3%.

Investors will pay close attention to the core PCE inflation data as it is the Federal Reserve’s (Fed) preferred inflation measure for decision-making on interest rates. The inflation data will influence market expectations for the Fed's likely interest rate action in the December meeting. According to the CME FedWatch tool, the probability for the Fed to cut interest rates by 25 basis points (bps) to 4.25%-4.50% in the December meeting has increased to 65% from 56% a week ago.

Dovish Fed bets have escalated after the release of the Federal Open Market Committee (FOMC) minutes for the policy meeting held on November 7 even though it didn’t offer any meaningful guidance about the interest rate path. Some officials reportedly suggested that the Fed could consider pausing its rate-cutting cycle if inflation remains “elevated”, while others argued that the policy-easing cycle would be needed to accelerate if economic conditions or the labor market deteriorate.