GBP/USD gathers strength to a weekly high near 1.2780, eyes on UK GDP, US PPI data

• GBP/USD trades strongly for the third consecutive day on Friday.
• The BOE may be forced to provide the timeline of its first rate cut as inflation might decline faster than expected.
• The US CPI inflation reports may challenge the plans of the Federal Reserve (Fed) to cut the interest rate this year.
• Traders will monitor the monthly GDP growth numbers for November and the US Producer Price Index (PPI).

The GBP/USD pair gains ground to nearly the weekly high during the early Asian trading hours on Friday. The November UK Gross Domestic Product (GDP) is estimated to grow by 0.2% MoM from the 0.3% contraction in the previous reading. GBP/USD currently trades near 1.2780, gaining 0.16% on the day.

The Bank of England (BOE) Governor Andrew Bailey had forecast a tough battle lay ahead to bring inflation back to its 2% target while pushing back against speculation about cutting rates. Nonetheless, a decline in energy prices might bring inflation down at a faster rate than the BOE expected. The UK central bank may be forced to provide the timeline of its first interest rate cut after three leading forecasters issued a surprise update suggesting the inflation rate will halve to 2% by April.

On the USD’s front, the recent US inflation reports may challenge the plans of the Federal Reserve (Fed) to cut the interest rate this year. The US Bureau of Labor Statistics showed on Thursday that the US Consumer Price Index (CPI) increased more than estimated in December, as the CPI rose 3.4% YoY from the 3.1% increase seen the month prior. The Core CPI figure, which excludes volatile food and energy prices, grew 3.9% YoY in December, above the market consensus of 3.8%.

Looking ahead, market participants will keep an eye on the UK Manufacturing Production, Industrial Production, and monthly Gross Domestic Product for November. On the US docket, the Producer Price Index (PPI) for December will be due, and Fed’s Neel Kashkari is set to speak.