GBP/USD sticks to modest intraday gains, remains below 1.2300 mark ahead of US CPI

• GBP/USD edges higher on Friday and draws support from a combination of factors.
• Stronger UK wage growth data underpins the British Pound and acts as a tailwind.
• Subdued USD demand offers additional support, though the upside remains capped.
• Investors now await the key CPI reports from the US and the UK ahead of the FOMC.

The GBP/USD pair struggles to capitalize on its modest intraday uptick and retreats a few pips from the daily top, around the 1.2300 mark touched during the early European session. The pair is currently placed just above the mid-1.2200s and remains well within a familiar trading range held over the past week or so.

The British Pound gets a minor lift after stronger UK wage growth data revived bets for a supersized 75 bps rate hike by the Bank of England. In fact, the UK Office for National Statistics (ONS) reported that Average Weekly Earnings, excluding bonuses, rose by +6.1% during the three months to October as compared to +5.8% in the previous month. Moreover, the gauge including bonuses edged higher to 6.1% in October from 6.0% in September, suggesting that upward pressure on inflation coming from rising salaries might continue to grow.

This, to a larger extent, helps offset an uptick in the unemployment rate and an unexpected rise in the number of people claiming unemployment-related benefits. Apart from this, subdued US Dollar demand turns out to be another factor offering additional support to the GBP/USD pair. A generally positive mood around the equity markets, bolstered by the optimism over the easing of COVID-19 curbs in China, keeps the USD bulls on the defensive. That said, the uncertainty over the Fed's rate hike path holds back traders from placing aggressive bets.

Market participants seem convinced that the Fed will slow the pace of its policy tightening and have been pricing in a relatively smaller 50 bps lift-off in December. That said, the incoming positive US economic data has been fueling speculations that the Fed might lift rates more than projected. Hence, the focus will remain on the outcome of a two-day FOMC policy meeting, scheduled to be announced on Wednesday. In the meantime, traders will take cues from the latest US consumer inflation figures, due later during the early North American session on Tuesday.

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