The Pound Sterling (GBP) advances against the US Dollar early Tuesday on positive market sentiment ahead of Wednesday’s crucial US Consumer Price Index (CPI) release. Market participants await the CPI data for clues on the potential timing of Federal Reserve (Fed) rate cuts.

US Dollar Weakens, Pound Supported by Growth Forecasts

The US Dollar Index (DXY) retreated slightly toward the key 104.00 support ahead of the CPI report. Meanwhile, the Pound Sterling is supported by surveys indicating modest UK economic growth this year, despite a recent technical recession. The latest Office for Budget Responsibility (OBR) projections show a forecast growth of 0.8% for 2023.

Focus on UK GDP, Manufacturing Data

This week, investors will closely monitor Friday’s release of UK monthly Gross Domestic Product (GDP) and factory data for February. This data will offer a clearer picture of economic activity after January’s 0.2% GDP growth and provide insights into the strength of the UK’s manufacturing sector.

Technical Outlook: GBP/USD Consolidates Near 1.2700

The GBP/USD pair traded within Monday’s range near 1.2660, aided by a broader appetite for risk-sensitive assets. The 200-day Exponential Moving Average (EMA) around 1.2570 offers support. Key downside support lies at the psychologically significant 1.2500 level. The 14-period Relative Strength Index (RSI) remains within the 40.00-60.00 range, reflecting market indecision.