GBP/USD consolidates above 1.2400, traders seem non-committed amid mixed fundamental cues

• GBP/USD struggles to gain any meaningful traction and oscillates in a range on Thursday.
• Bets that the Fed is done raising rates cap the USD recovery and lend support to the pair.
• Expectations that the BoE will start cutting rates in 2024 act as a headwind for the GBP.

The GBP/USD pair consolidates the overnight rejection slide from the 100-day Simple Moving Average (SMA), around the 1.2500 psychological mark, or a two-month top, and oscillates in a narrow band during the Asian session on Thursday. Spot prices, meanwhile, manage to hold above the 1.2400 round figure and remain at the mercy of the US Dollar (USD) price dynamics.

The USD Index (DXY), which tracks the Greenback against a basket of currencies, struggles to capitalize on the previous day's modest recovery from its lowest level since September 1 amid dovish Federal Reserve (Fed) expectations. The bets were lifted by the softer US CPI report released on Tuesday, which showed consumer inflation was cooling faster than anticipated. Moreover, the markets are now pricing in a greater chance that the Fed will start cutting rates during the first half of 2024, which keeps the US Treasury bond yields depressed and acts as a headwind for the Greenback.

Apart from this, the prevalent risk-on environment is seen as another factor undermining the safe-haven buck and lending some support to the GBP/USD pair. The upside, however, remains capped in the wake of growing acceptance that the Bank of England (BoE) will soon start cutting interest rates, bolstered by softer UK consumer inflation figures on Wednesday. In fact, the headline UK CPI was flat on a monthly basis and the yearly rate decelerated sharply from 6.7% to 4.6% in October – hitting a two-year low. Moreover, the Core CPI also fell to 5.7% from 6.1% in September.

The aforementioned mixed fundamental backdrop warrants some caution for aggressive traders and before positioning for a firm near-term direction in the absence of any relevant macro data from the UK on Thursday. The US economic docket, meanwhile, features the usual Weekly Initial Jobless Claims, the Philly Fed Manufacturing Index and Industrial Production figures. This, along with the US bond yields and the broader risk sentiment, might influence the USD price dynamics and allow traders to grab short-term opportunities around the GBP/USD pair.

Technical levels to watch