Pound sterling fails to maintain gains spurred by positive S&P Global Services PMI data.
The Pound Sterling (GBP) struggles to maintain its rebound move in the European session on Tuesday. As the near-term prognosis for risk-sensitive assets remains bleak. The attraction of safe-haven assets is broadly positive. As investors believe the Federal Reserve (Fed) will not hurry to decrease interest rates. Receding prospects of a recession in the United States. Due to solid labor and retail demand give Fed officials plenty of time to Decide on rate decreases.
The UK economy is on the verge of technical recession.
Despite an improvement in the UK’s S&P GlobalCIPS Services PMI in January. The GBPUSD has unable to accelerate gains. The economic statistics improved to 54.3. Exceeding predictions of 53.8 and the previous reading of 53.4. According to the agency. A strong inflow of new orders, solid hiring in the last six months. And growing expectations of rate reduction by the Bank of England (BoE) all contributed to a significant increase in the Services PMI.
Daily Market Movers: Pound Sterling is on edge as the US Dollar recovers.
The pound sterling struggles to hold the 1.2500 fragile support identified in the late Asian session on Tuesday, as the broader appeal remains negative amid a cautious market attitude.
The prospects for risk-perceived assets are Bearish since anticipation for significant rate reduction by the Federal Reserve have faded due to strong US economic growth.
According to the CME Fedwatch tool, investors predict a 25 basis point (bps) rate drop in May, down from March estimates.
The US economy is doing well, with growing industrial and IT order books, favorable labor market conditions, and strong consumer spending.
Minneapolis Federal Reserve Bank President Neel Kashkari stated on Monday that fewer threats to economic growth are giving the central bank more time to decide on rate decreases.
The Pound Sterling is also at risk of a technical recession. Which might lead Bank of England officials to shift to a dovish interest rate stance.
It is worthwhile. A technical recession is defined as an economy. That has contracted for two consecutive quarters.
Moreover The United Kingdom’s GDP fell by 0.1% in the third quarter of 2023. Raising the prospect of a technical recession as it is anticipated to underperform again.
The BoE’s Pill indicates that policymakers are contemplating when the central bank would begin lowering interest rates.
Huw Pill, the BoE’s Chief Economist, provided slightly dovish guidance on interest rates. Which lowered the attraction of the Pound Sterling.
Furthermore On Monday, BoE Pill stated. That the question of “if” it is right to decrease interest rates has shifted to “when.”
In the most recent monetary policy announcement. BoE Governor Andrew Bailey stated that inflation is heading in the right direction. And that borrowing costs are “under review”.
Moreover With a light economic calendar. Market participants will focus on the address by BoE Catherine Mann, which is set for Thursday. Mann was one of two of nine Monetary Policy Committee (MPC) members that voted for a rate increase of 25 basis points.
