The Pound Sterling (GBP) maintains its position above a two-week low of 1.2845 against the US Dollar (USD) in Friday’s American session. This stability comes despite the release of hotter-than-expected US core Personal Consumption Expenditures (PCE) price index data for June.
Market Reaction:
The core PCE inflation, a key indicator for the Federal Reserve (Fed), came in at 2.6% year-on-year, exceeding the forecast of 2.5%. This unexpected result could potentially dampen expectations of early rate cuts by the Fed.
Despite the higher inflation figures, the US Dollar Index (DXY) declined to near 104.20. Market attention now turns to the upcoming Fed monetary policy meeting, where investors will seek clues on the future direction of interest rates.
Pound Sterling Outlook:
The Pound Sterling demonstrates resilience despite uncertainties surrounding its outlook. The market is focused on the Bank of England’s (BoE) monetary policy meeting scheduled for Thursday, with expectations of a potential rate cut. However, the lack of endorsement for rate cuts from BoE officials and concerns about persistent wage growth could limit the likelihood of a policy change.
Recent economic data from the UK has been mixed, with a sharp decline in retail sales for June raising concerns about consumer spending. However, the preliminary S&P Global/CIPS PMI data for July indicated a strong start to the third quarter, suggesting continued economic expansion.
Technical Analysis:
The GBP/USD pair remains below the crucial support level of 1.2900 but is holding above the 20-day Exponential Moving Average (EMA). The 14-day Relative Strength Index (RSI) suggests a neutral stance, indicating a fading bullish momentum.
The two-year high near 1.3140 remains a key resistance zone for the Cable.
