GBP/USD finds support above the 1.2700 mark, eyes on Fed, BoE rate decision

• GBP/USD trades in positive territory for the second consecutive day near 1.2710. 
• The US Federal Reserve is expected to maintain its key interest rates for a fourth consecutive meeting.
• BoE is widely anticipated to maintain the interest rates steady amid signs of easing inflation. 
• The Federal Open Market Committee (FOMC) and the Bank of England (BoE) meeting will be in the spotlight this week. 

The GBP/USD pair remains well-supported above the 1.2700 mark during the early Asian session on Tuesday. Markets turn to a cautious mood ahead of the key two events from the Federal Open Market Committee (FOMC) and the Bank of England (BoE) on Wednesday and Thursday, respectively. GBP/USD currently trades around 1.2710, unchanged for the day. 

Inflation in the United States continues to surprise to the downside. The US Core Personal Consumption Expenditures Price Index (Core PCE), the Fed’s preferred gauge, fell to 2.9% in December, dropping below 3% for the first time since early 2021. The stage is prepared for the Fed to begin cutting interest rates in the coming months. At the January meeting, the FOMC will leave benchmark interest rates unchanged at a 23-year high of 5.25–5.5%, after a lengthy effort to tame rampant inflation.

On the British Pound front, the BoE is widely anticipated to maintain the interest rates steady. Traders will monitor the guidance on interest rates and message about the possibility of future cuts. BoE Governor Andrew Bailey said it’s premature to lower the rates. However, signs that the inflation crisis is easing off might convince the central bank to lower rates after all.

Moving on, market players will keep an eye on the US JOLTS Job Openings and the Consumer Confidence gauge by the Conference Board, due on Tuesday. The highlight of this week will be the FOMC meeting on Wednesday and the BoE interest rate decision on Thursday. These events might trigger volatility in the market and give a clear direction to the GBP/USD pair.