Sterling fell on Wednesday after UK GDP and output data came in below forecast and then extended losses following U.S. CPI data that further diminished chances the Fed would deliver a super-sized 50bp cut next week, with UK-U.S.
rate convergence now threatening to keep GBP on the back foot.

Recent market expectations for a jumbo Fed rate cut had prodded sterling specs to reload long positions, which are likely unwinding as bulls have been unable to pull GBP/USD to new highs.

The UK GDP and output data, while not moving the dial on a September BoE cut, may increase dovishness among BoE members and bring BoE-Fed rate-cut expectations more in line.

Meanwhile, the U.S. CPI data has reduced December Fed rate cut expectations as well.

With GBP/USD struggling to find fuel for a run to new 2024 highs above 1.3269, risks are skewed to the downside as sterling bulls reverse the August rise from the 1.2666 low.
A close below 1.2967 -- which is the 50% Fib of 1.2666-1.3269 -- would likely to shift momentum to GBP bears.

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