The Pound Sterling (GBP) strengthened against the US Dollar (USD) on Monday, despite facing some selling pressure near the 1.3400 level. The GBP/USD pair is supported by a weaker US Dollar, which has been influenced by the recent decline in US inflation.
US Inflation and Fed Rate Expectations:
The Personal Consumption Expenditure Price Index (PCE) data showed a slower-than-expected increase in annual inflation, which could lead to further interest rate cuts by the Federal Reserve (Fed). However, the Fed is also cautious about potential risks to the labor market and economic slowdown.
Economic Data and Fed Chair’s Speech:
Investors will be closely watching a series of US economic data releases this week, including the ISM Manufacturing and Services PMIs, ADP Employment, Nonfarm Payrolls (NFP), and JOLTS Job Openings data. These data will provide insights into the health of the US job market and economy.
Federal Reserve Chair Jerome Powell’s speech on Monday will also be a key event for investors. His comments will provide guidance on the Fed’s future interest rate moves, including the possibility of another large rate cut or a more gradual approach.
Pound Sterling Strengthens:
The Pound Sterling has been gaining against major currencies, except for Asia-Pacific currencies. Investors expect the Bank of England (BoE) to cut interest rates less aggressively than other Group of Seven (G-7) nations.
Economic Data and Technical Analysis:
The revised estimates for UK GDP showed a slight slowdown in growth compared to previous estimates. The Pound Sterling’s near-term outlook remains bullish, supported by a rising 20-day Exponential Moving Average (EMA).
