GBP/USD consolidates its gains above 1.2550 ahead of UK employment data

• GBP/USD trades sideways around 1.2560 in Tuesday’s early Asian session. 
• Many Fed officials emphasized the need to hold interest rates at current levels until inflation returns to the target. 
• Markets have priced in a 25 bps reduction in August and 50 bps in cuts overall in 2024.

The GBP/USD pair consolidates its gains near 1.2560 on Tuesday during the early Asian session. The weaker US Dollar (USD) amidst the generalized better tone in the appetite for risk-related assets provides some support to the major pair. Investors will closely monitor the UK employment market, the speech by the BoE's  Pill, and US Producer Price Index (PPI) data, due later on Tuesday. 

Several Federal Reserve (Fed) officials emphasized the need to hold rates higher for longer as inflation remains elevated. Fed vice chair Philip Jefferson on Monday became the latest central bank official to call for holding interest rates at current levels until inflation shows more signs of easing. Jefferson said that he will continue to look for additional evidence that inflation is going to return to the 2% target. 

The financial markets have priced in nearly 5% odds of June rate cuts, down from 10%, while the chance of September rate cuts has fallen to 75% from nearly 90% at the start of last week. The cautious approach from Fed officials will likely lift the Greenback in the near term and cap the upside of the pair.  

On the other hand, there is growing speculation that the Bank of England (BoE) will begin to cut the interest rate in the summer, with traders pricing in a 25 basis point (bps) reduction in August and 50 basis points (bps) in cuts overall in 2024. The BoE governor Andrew Bailey said during the press conference that he would monitor the forthcoming data releases before deciding on rate cuts. The UK employment data for April might offer some cues about the economic situation and further monetary policy. A higher-than-expected outcome might weigh on the Pound Sterling (GBP) and create a headwind for the GBP/USD pair.