Based on signals from short term interest rate futures GBP/USD should be on a slight firming track, but bulls will need confirmation from Wednesday's U.S. CPI data, and next week's Fed and BoE rate decisions.

For now, price action is in limbo, within a 1.2762-1.2726 range in early NorAm.

Analysts expect U.S. CPI to show a slight increase in headline inflation and steady in core, with both remaining above the Fed's 2% target, though SOFR futures assign a roughly 80% chance of a Fed cut on Dec. 18.

The BoE, on the other hand is expected to hold rates steady on Dec. 19, assuming UK CPI on Dec. 18 doesn't deviate significantly from October levels.

The slight UK yield advantage and the UK's avoidance of the Trump tariff crosshairs has allowed GBP/USD to rise 2.3% from sub-1.25 November lows.

If inflation and employment data, along with central bank guidance, remain consistent, sterling should maintain a slight bid, given its yield advantage over the dollar and widening spreads with other developed market currencies.

Sterling bulls need a close above 200-DMA resistance at 1.2822 to keep recent bullish momentum intact for a test of more significant resistance at 1.2955, the 50% Fib of 1.3434-1.2475.

A breach of 1.2955 will put the 2024 high at 1.3434 in sharp focus. For more click on

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(Paul Spirgel is a Reuters market analyst. The views expressed are his own)

((paul.spirgel@thomsonreuters.com))