Pound sterling falls against the US dollar to around 1.2880 following strong US Q2 flash GDP statistics.
On Thursday, the pound sterling (GBP) performed poorly against its major rivals, with the exception of the Australian dollar (AUD) and the New Zealand dollar (NZD). The British pound has come under substantial pressure as market analysts anticipate the Bank of England (BoE) returning to policy normalization in August.
BoE officials are hesitant to confirm market speculation on a rate cut in August.
A Reuters survey conduct on July 18-24 revealed that more than 80% of economists expected the BoE will decrease. Its main borrowing Rates were raised by 25 basis points (bps) to 5% at the August meeting. However, in the June poll, 97% of respondents predicted a rate drop. Contrary to Reuters’ poll, market participants only see a 45% possibility of rate decreases in August.
The absence of BoE officials’ endorsement for rate decreases appears to have restrained market speculation. The UK’s annual headline inflation has returned to the central bank’s target of 2%. However, officials are hesitant to confirm rate-cut forecasts due to concerns about wage growth continuing strong, which fuels inflationary pressures in the service sector.
Furthermore On the economic data front, the optimistic preliminary UK S&P Global/CIPS report for July has indicated a robust start to the third quarter. The Composite PMI came in at 52.7, higher than expectations of 52.6 and the previous report of 52.3, owing to an increase in activity in both the manufacturing and service sectors. The Manufacturing and Services PMI increased to 51.8 and 52.4, respectively, exceeding previous readings.
Daily Market movers: Pound Sterling stays on the back foot as BoE rate-cut bets surge.
The pound sterling falls to 1.2880 against the US dollar (USD) in Thursday’s American session. The GBPUSD pair falls on good preliminary US Q2 GDP statistics. The US Q2 GDP report showed that the economy increased at a strong pace of 2.8%, exceeding the consensus of 2.0% and the previous release of 1.4%. This has greatly improved the outlook for the United States economy.
Moreover The US Dollar Index (DXY), which measures the value of the US dollar against six major currencies, has recovered to a weekly high above 104.50.
However, a strong drop in the GDP Price Index has provided relief to Federal Reserve (Fed) policymakers and reinforced forecasts of interest rate decreases in September. The GDP Price Index fell quicker than expected, to 2.3%, down from 2.6% and 3.1% in the previous edition.
The Personal Consumption Expenditures Price Index (PCE) data for June. Which will be released on Friday, will be the primary driver of the US Dollar in the coming months. The core PCE inflation, the Fed’s preferred inflation gauge, expected to have decelerated to 2.5% from 2.6% in May. With the monthly amount Growing consistently by 0.1%.
