GBP/USD eases from daily top on weaker UK data, hovers around 1.3100 ahead of US CPI

• GBP/USD attracts buyers for the second straight day amid a modest USD weakness.
• The intraday uptick loses steam following the disappointing release of UK macro data.
• The downside seems limited as traders await the release of the crucial US CPI report.

The GBP/USD pair builds on the overnight modest bounce from the 1.3050-1.3045 region, or over a three-week trough and gains some follow-through positive traction for the second successive day on Wednesday. Spot prices, however, struggle to capitalize on the move beyond the 1.3100 mark and retreat a few pips in the last hour following the release of the UK macro data.

The UK Office for National Statistics reported that the economic growth remained flat for the second straight month in July as compared to expectations for a modest 0.2% growth. Moreover, the UK Industrial and Manufacturing Production unexpectedly shrank during the reported month. This comes on top of a slowdown in the UK wage growth, which lifts bets for more interest rate cuts by the Bank of England (BoE) and undermines the British Pound (GBP). 

The US Dollar (USD), on the other hand, attracts some sellers and for now, seems to have snapped a three-day winning streak back closer to the monthly peak amid dovish Federal Reserve (Fed) expectations. This, in turn, offers some support to the GBP/USD pair and helps limit the downside for the GBP/USD pair. Traders also seem reluctant to place aggressive bets and prefer to wait on the sidelines ahead of the release of the US consumer inflation figures.

The crucial US Consumer Price Index (CPI) report should influence market expectations about the size of the rate cut by the Fed at its upcoming policy meeting on September 17-18. This, in turn, will play a key role in driving the USD demand in the near term and provide some meaningful impetus to the GBP/USD pair. Nevertheless, the aforementioned fundamental backdrop warrants some caution before positioning for a further appreciating move for the currency pair.