Pound sterling falls marginally below 1.2500 as a result of several headwinds.

The Pound Sterling (GBP) fell below the psychological support of 1.2500 against the US Dollar (USD) in Wednesday’s early New York session. The GBPUSD pair is expected to fall due to a number of headwinds, including a significant recovery in the US dollar and uncertainty surrounding the Bank of England’s (BoE) interest rate decision, which is scheduled for Thursday.

Investors expect UK interest rates to remain stable at 5.25%.

The interest rate in the United Kingdom is predicted to remain unchanged at 5.25% for the sixth time. in a row. However, the BoE’s interest rate outlook could turn slightly dovish as policymakers are confident that headline inflation will return to the desired rate of 2% in April, according to comments made by BoE Governor Andrew Bailey at the International Monetary Fund’s (IMF) annual Spring Meeting last month.
Financial markets believe that the BoE will begin lowering interest rates after the June meeting. Traders now forecast 53 basis points (bps) of easing this year, meaning at least two quarter-point cuts, after inflation data last month showed prices slowed less than predicted in March, according to Reuters. The hopes for the same increased after Andrew Bailey stated in the last The monetary policy meeting concluded that speculation of two or three rate cuts this year is justified.

Daily Market movers: Pound Sterling edged down while the US Dollar extended recovery.

The pound sterling extends its decline against the US dollar, falling marginally below the psychological support of 1.2500. The attraction of risky assets has weakened following Minneapolis Federal Reserve (Fed) Bank President Neel Kashkari’s hawkish outlook on US interest rates on Tuesday.
Kashkari expressed concern over stalled disinflationary momentum due to housing market strength and warned that interest rates may need to continue at current levels for the rest of the year. For a rate cut, Kashkari highlighted that he needs to see multiple positive inflation readings, which can strengthen confidence that inflation is on track to return. to the target rate of 2%. He also mentioned that deterioration in the labor market could warrant a rate drop.
Kashkari’s hawkish interest rate stance has boosted the appeal of the US dollar, with the US Dollar Index (DXY), which tracks the Greenback’s value versus six major currencies, rising to 105.50. The USD Index has recovered the majority of its losses from April’s dismal US Nonfarm Payrolls (NFP) and ISM Services PMI data.
The expectation that the Fed would lower interest rates from their present levels at the September meeting remains strong. The CME FedWatch tool indicates that traders expect two rate cuts this year.

Investors will mostly focus on statements by Fed policymakers to determine the next move in the US dollar.

This week, investors will mostly focus on statements by Fed policymakers to determine the next move in the US dollar. Due to a lack of top-tier US economic statistics. Fed Vice Chair Philip Jefferson, President Susan Collins of the Bank of Boston, and Fed Governor Lisa Cook will all deliver interest rate advice on Wednesday.