GBP/USD holds steady above 1.2600 mark as traders keenly await US CPI report

• GBP/USD oscillates in a narrow trading band for the second successive day on Wednesday.
• A softer risk tone lends support to the safe-haven USD and acts as a headwind for the pair.
• The downside seems limited ahead of the US CPI on Wednesday and the BoE on Thursday.

The GBP/USD pair extends its sideways consolidative price move for the second straight day and remains confined in a narrow trading band, above the 1.2600 mark through the first half of the European session on Wednesday.

A generally softer tone around the equity markets benefits the safe-haven US Dollar (USD), which, in turn, is seen as a key factor acting as a headwind for the GBP/USD pair. That said, growing acceptance that the Federal Reserve (Fed) is nearing the end of its year-long rate-hiking cycle is holding back the USD bulls from placing aggressive bets. Moreover, markets have started pricing in the possibility that the US central bank will start cutting rates later this year.

In contrast, the Bank of England (BoE) is widely anticipated to hike interest rates by 25 bps on Thursday, which continues to underpin the British Pound and contributes to limiting the downside for the GBP/USD pair, at least for the time being. Traders also seem reluctant to place aggressive bets and prefer to move to the sidelines ahead of the key data/event risks - the release of the US consumer inflation figures this Wednesday and the BoE meeting on Thursday.

The crucial US CPI report will play a key role in influencing market expectations about the Fed's next policy move, which, in turn, should drive the USD demand in the near term. Apart from this, the highly-anticipated BoE decision should help investors to determine the next leg of a directional move for the GBP/USD pair. In the meantime, the divergent BoE-Fed expectations might continue to act as a tailwind for the major and warrant some caution for bearish traders.

From a technical perspective, the GBP/USD pair has been trending higher along a one-month-old ascending channel. This points to a well-established short-term bullish trend and supports prospects for a further near-term appreciating move for the GBP/USD pair. Hence, any meaningful corrective decline might still be seen as a buying opportunity and is likely to remain cushioned in the absence of any relevant market-moving data, either from the UK or the US.

Technical levels to watch