The Pound Sterling (GBP) remains stable near a three-month low of 1.2750 against the US Dollar (USD) during Wednesday's London session. Investors are anticipating the release of the US Consumer Price Index (CPI) data for October, scheduled for 13:30 GMT.
The US Dollar Index (DXY), which measures the dollar against six major currencies, is holding steady at approximately 106.00, its highest level in over six months. Economists predict a rise in headline inflation to 2.6% from 2.4% in September, with the core CPI expected to increase by 3.3% year-on-year.
Market expectations regarding the Federal Reserve's monetary policy in December are not anticipated to shift significantly unless there is a marked deviation from these forecasts. Most Federal Reserve officials have expressed confidence in the ongoing disinflation trend towards the bank's 2% target.
Minneapolis Federal Reserve President Neel Kashkari, however, conveyed caution, stating that an upside surprise in inflation before December could prompt a reassessment of policy. He characterized the current monetary policy as 'modestly restrictive' and indicated expectations for continued economic growth.
The probability of a 25 basis points rate cut by the Fed in December now stands at 62%, down from 70% a week prior, according to the CME FedWatch tool.
The GBP/USD pair saw a sharp decline on Tuesday, dropping below the 200-day Exponential Moving Average (EMA) around 1.2860, signaling a broadly negative trend. The 14-day Relative Strength Index (RSI) has also dipped below 40.00, indicating bearish momentum.
Key support for the Pound is at the August low of 1.2665, while resistance is projected near the psychological level of 1.3000.