GBP/USD holds ground above 1.2600 ahead of UK CPI data

• GBP/USD appreciates as the US Dollar loses ground amid lower Treasury yields.
• Trump shared plans to impose a 25% tariff on foreign cars, with higher duties expected on semiconductor chips and pharmaceuticals.
• Traders await the UK Consumer Price Index (CPI) data for fresh insights into the BoE's policy outlook.

GBP/USD remains firm after losses in the previous session, trading around 1.2610 during the Asian session on Wednesday. Traders await the release of January's Consumer Price Index (CPI) data from the United Kingdom (UK) scheduled to be released later in the day. The Pound Sterling (GBP) could see significant movement in response to the inflation report, which may influence the Bank of England's (BoE) interest rate-cut strategy amid ongoing inflationary pressures.

The pair finds support as the US Dollar (USD) struggles amid falling Treasury yields, despite ongoing caution regarding the Federal Reserve's (Fed) policy outlook. Investors await the release of the FOMC Minutes later in the North American session.

The US Dollar Index (DXY), which measures the USD against six major currencies, has edged lower to around 107.00. Meanwhile, US Treasury yields stand at 4.30% for the 2-year note and 4.54% for the 10-year note at the time of writing.

On Tuesday, San Francisco Fed President Mary Daly noted that while US economic conditions remain positive, the outlook for rate cuts in 2025 remains uncertain. Philadelphia Fed President Patrick Harker reinforced the need for a steady interest rate policy, citing persistent inflation concerns.

However, the USD could regain strength as risk sentiment shifts following fresh tariff threats from US President Donald Trump. According to Bloomberg, Trump stated on Tuesday that he plans to impose a 25% tariff on foreign cars, with higher duties also expected on semiconductor chips and pharmaceuticals. He indicated that an official announcement could come as soon as April 2.