GBP/USD trades on a softer note above the mid-1.2600s, US PCE data eyed

• GBP/USD loses traction near 1.2660 in Thursday’s early Asian session. 
• US economic growth was slightly weaker than previously forecast in the fourth quarter of 2023. 
• BoE policymakers said they need more incoming data to consider before lowering interest rates.
• The US Core Personal Consumption Expenditures Index (Core PCE) will be in the spotlight on Thursday. 

The GBP/USD pair bounces off the multi-day lows near 1.2620 and recovers to 1.2660 during the early Asian session on Thursday. The renewed US Dollar (USD) demand ahead of the key US event weighs on the major pair. Investors await the US January Personal Consumption Expenditures Price Index (PCE) on Thursday for fresh impetus. At press time, GBP/USD is trading at 1.2660, down 0.01% for the day.

The New York Federal Reserve (Fed) President John Williams said on Wednesday that even though there's still some distance to cover in achieving the Fed 2% inflation target, the door is opening to interest rate cuts this year, depending on how the data come in. 

The recent inflation data has caused financial markets to push back the timing of the first rate cut, which provides some support for the Greenback. Nonetheless, the US PCE data due later in the day might offer some hints about the inflation trajectory in the United States. 

On Wednesday, the US Gross Domestic Product (GDP) for the fourth quarter grew at a 3.2% annualized rate from 3.3% in the previous reading, according to the US Bureau of Economic Analysis (BEA). The figure came in weaker than the estimation of a 3.3% expansion for Q4. 

The Bank of England (BoE) policymakers said they need more evidence that inflation will come down to the 2% target before they decide to lower the key lending rates. The BoE expects year-over-year inflation to decline from 4% last month to 2% in the second quarter of this year, but then rise to 3% by the end of 2024 as the disinflationary effect of lower natural gas prices fades.

Looking ahead, traders will keep an eye on the Fed's preferred inflation measure, the Core Personal Consumption Expenditures Index (Core PCE), due on Thursday. Additionally, the UK Nationwide Housing Prices and Consumer Credit will be released later in the day.