The GBP/USD pair has been on a downward trend for the third consecutive session, hovering around 1.3160 during the Asian trading hours on Friday. This decline can be attributed to the strength of the US Dollar (USD) following the release of better-than-expected economic data on Thursday. Traders are now eagerly awaiting the release of July’s US Personal Consumption Expenditure (PCE) Price Index later in the North American session.
In the second quarter, the US Gross Domestic Product (GDP) grew at a rate of 3.0%, surpassing both the expected and previous growth rates of 2.8%. Furthermore, Initial Jobless Claims data revealed a decrease in the number of individuals filing for unemployment benefits to 231,000 for the week ending August 23, lower than the previous 233,000 and slightly below the anticipated 232,000.
Despite the positive economic data, dovish comments from the Federal Reserve could limit further gains for the USD. Federal Reserve Atlanta President Raphael Bostic, known for his hawkish stance on the Federal Open Market Committee (FOMC), suggested that it may be time to consider rate cuts due to cooling inflation and a higher-than-expected unemployment rate. However, Bostic emphasized the need to wait for confirmation from upcoming economic reports before the Fed’s September meeting.
On the other hand, the downside for the Pound Sterling (GBP) may be restrained as traders anticipate the Bank of England (BoE) to maintain higher interest rates compared to the Federal Reserve. The BoE recently lowered rates by 25 basis points to 5% on August 1, with markets pricing in an additional 40 basis points cut by year-end.
In a speech at the Jackson Hole Symposium, BoE Governor Andrew Bailey mentioned that the secondary effects of inflationary pressures are expected to be less significant than previously thought. However, Bailey cautioned against rushing into further rate cuts, as reported by Reuters.
Analysis:
The GBP/USD pair is experiencing a decline as traders exercise caution ahead of key US economic data. The strong US GDP growth and positive jobless claims figures have boosted the USD, while dovish comments from the Fed have tempered expectations. On the other hand, the GBP is finding support as the BoE maintains its stance on interest rates. Traders should monitor upcoming economic reports and central bank statements for further market direction.