GBP/USD holds positive ground above 1.3450 after UK CPI data, Fed rate decision eyed

• GBP/USD attracts some buyers to around 1.3460 in Wednesday’s early European session. 

• UK CPI inflation eased to 3.4% YoY in May, as expected

• The Fed interest rate decision will take center stage later on Wednesday, with no change in rate expected. 

The GBP/USD pair strengthens near 1.3460 during the early European trading hours on Wednesday. The Pound Sterling (GBP) remains firm against the Greenback after the UK Consumer Price Index (CPI) inflation report. The attention will shift to the US Federal Reserve (Fed) interest rate decision later on Wednesday. 

Data released by the United Kingdom’s Office for National Statistics on Wednesday showed that the country’s headline CPI rose 3.4% YoY in May, compared to a rise of 3.5% in April. This reading came in line with the market consensus. The Core CPI, which excludes the volatile prices of food and energy, climbed 3.5% YoY in May versus 3.8% prior, softer than the expectation of 3.6%. 

Meanwhile, the monthly UK CPI inflation eased to 0.2% in May from 1.2% in April. Markets projected an increase of 0.2% reading. The Pound Sterling holds positive ground in an immediate reaction to the mixed UK CPI inflation data.

On the USD’s front, the Fed is expected to leave borrowing costs unchanged at its June meeting on Wednesday. Traders now see a nearly 80% possibility of a Fed rate cut in September, followed by another one in October, according to Reuters. Traders will take more cues from the FOMC Press Conference. If the Fed delivers a dovish hold, the Greenback is likely to resume weakening.