The Pound Sterling Faces Pressure Against the US Dollar
- Market Expectations for Fed Rate Cuts
- BoE Expected to Cut Interest Rates
In today’s financial landscape, the Pound Sterling (GBP) is experiencing resistance near the 1.3400 level against the US Dollar (USD). This halt in the GBP/USD pair’s rally is a result of investors’ focus on the upcoming release of the US Personal Consumption Expenditure Price Index (PCE) data for August, scheduled for 12:30 GMT.
US PCE Inflation Data Impact
The US core PCE index, a key indicator of inflation preferred by the Federal Reserve (Fed), is expected to show a 2.7% year-on-year growth, slightly higher than the 2.6% growth seen in July. Monthly price growth is estimated at 0.2%, indicating a steady increase.
Market Speculation on Fed Rate Cuts
The PCE data will heavily influence market speculation regarding potential Fed interest rate cuts in November. Currently, market sentiment is divided on whether the Fed will opt for a 50 basis points rate cut or a smaller 25 basis points cut.
According to the CME FedWatch tool, the probability of a 50 basis points rate cut in November has decreased from 57% to 51%. Positive inflation data could strengthen the case for a larger rate cut, while weaker data might lead to a smaller adjustment.
Fed’s Stance on Inflation
In recent times, the significance of US inflation data has diminished as Fed officials express confidence in inflation returning to the target rate of 2%. The Fed is also keeping a close eye on labor market risks, as evidenced by their recent 50 basis points rate cut to 4.75%-5.00%.
Analysis of Market Movers
- Pound Sterling Performance: The GBP is weakening against major currencies, except for Asia-Pacific currencies, as investors await the PCE inflation data.
- Influence of UK Economic Data: With no significant UK data in the coming weeks, market expectations for the Bank of England’s (BoE) monetary policy will shape the GBP’s movement.
- BoE Monetary Policy Outlook: Expectations suggest a potential interest rate cut by the BoE in the remaining policy meetings this year. BoE Governor Andrew Bailey’s comments indicate a gradual downward path for interest rates.
Technical Analysis of Pound Sterling
The Pound Sterling is facing selling pressure near the 1.3400 level against the US Dollar. Despite this, the near-term outlook remains positive, with key support at the 20-day Exponential Moving Average (EMA) near 1.3235.
Technical indicators suggest an active bullish momentum, with resistance anticipated at 1.3500 and key support at the 20-day EMA for Pound Sterling bulls.