GBP/USD strengthens above 1.2550 ahead of US PCE inflation data

• GBP/USD gains traction to around 1.2570 in Wednesday’s early European session. 
• FOMC Minutes indicated a cautious approach to further rate cuts.  
• BoE’s Lombardelli said she needs to see more evidence before the next rate cut.

The GBP/USD pair trades on a stronger note near 1.2570 on Wednesday during the early European session. The Pound Sterling (GBP) consolidates despite US President-elect Donald Trump announcing more tariff measures. Traders brace for the release of US October Core Personal Consumption Expenditures (Core PCE) - Price Index for fresh impetus. 

Early Tuesday, Donald Trump pledged to impose tariffs on all products coming into the US from Canada, Mexico and China, which lifted the Greenback against the GBP in the previous session. The USD rally stalls on Wednesday as traders await the US Core PCE inflation data for more cues about the interest rate outlook. Meanwhile, the US Dollar Index (DXY), which measures the value of the USD against a basket of currencies, currently trades near the lower end of its weekly range of around 106.85.  

However, the potential downside for the Greenback seems limited amid the less dovish remarks from Federal Reserve (Fed) officials. The minutes from the November FOMC meeting released Tuesday showed that Fed officials expressed confidence that inflation is easing and the labor market remains strong, allowing for further interest rate cuts albeit at a gradual pace. Fed policymakers emphasized that further rate cuts likely will happen, though they did not specify the timing and pace of reductions.

Most Bank of England (BoE) policymakers support a gradual policy-easing approach. The BoE Deputy Governor Clare Lombardelli said on Tuesday that she needs to see more evidence of cooling price pressures before she backs another interest rate cut. The lower bets that the UK central bank will cut interest rates next month provide some support to the GBP for the time being.