British Pound edges lower but remains close to multi-month top as USD awaits US PCE

The British Pound (GBP) traded near a six-month high on Wednesday, but dipped slightly during the Asian session, remaining close to its current peak. Traders are watching the US Personal Consumption Expenditures (PCE) Price Index data for a potential boost to the GBP/USD pair. The Federal Reserve's upcoming speech by Kevin Warsh at the Jackson Hole Symposium and the US inflation data will be closely scrutinized for insights into the central bank's interest rate trajectory.

The Middle East crisis also plays a significant role in determining the near-term direction of the USD and GBP/USD pair. DBS Bank's Philip Wee points out a communication gap at the Federal Reserve, with Warsh emphasizing the need to explain how a Fed without forward guidance can anchor expectations, the amount of tightening they are willing to tolerate, and the policy boundary between the Fed and the Treasury.

Lower US inflation data, a sluggish labor market, and the Treasury's bond buyback strategy have led to a decline in US bond yields, which should support the GBP/USD pair. Iran's resumption of talks with Oman to manage commercial shipping traffic through the Strait of Hormuz has also caused crude oil prices to drop to a nearly two-week low, further contributing to the GBP/USD pair's strength.

The GBP/USD pair is trading below the 1.3660-1.3665 supply zone, which, if broken, could signal bullish traders and lead to additional gains. However, a failure to break through this barrier could indicate a deeper corrective slide below the 1.3600 level, closer to the mid-1.3500s.