GBP/USD struggles to gain ground below 1.2750 ahead of US CPI, Fed rate decision

• GBP/USD trades with a mild bearish bias near 1.2740 amid firmer US Dollar on Wednesday. 
• The US Fed is anticipated to keep rates on hold at its June monetary policy meeting. 
• The weaker UK employment data put pressure on the BoE's potential interest rate path.

The GBP/USD pair trades with mild losses around 1.2740 during the early Asian session on Wednesday. Extended gains in the US Dollar (USD) amid the cautious mood weigh on the major pair. Investors will closely watch the US Consumer Price Index (CPI) inflation data, just few hours before the FOMC meeting. 

The stronger US employment report last week dampened the expectation that the US Federal Reserve (Fed) will start cutting interest rates in September. Nonetheless, a softer-than-expected inflation report might influence Fed Chair Jerome Powell to maintain his stance of three interest rate cuts by the end of the year. This, in turn, might exert selling pressure on the Greenback. The US CPI figure is expected to show an increase of 3.4% YoY in May, while the core CPI is estimated to rise 3.5% YoY in the same report period. 

The Fed is widely expected to keep rates on hold at its June meeting on Wednesday. Traders will take more cues from the latest interest rate projections about how many times the Fed expects to ease rates in 2024. According to the CME FedWatch Tool, the markets are expecting just one to two cuts in 2024. 

On the other hand, the UK labor market has been contracting for the fourth time in a row. The Employment Change declined by 140K in the three months to April, compared to a 177K decrease in the previous reading. Meanwhile, the ILO Unemployment Rate increased to 4.4% in the three months to April from the previous reading of 4.3%, worse than the market expectation of 4.3%. The number of people claiming jobless benefits rose by 50.4K in May from an increase of 8.4K in April. The Pound Sterling (GBP) has edged lower after the weaker reports, as the Unemployment Rate and May Claimant data showed a worrying picture of the UK labour market condition.