Pound-US Dollar exchange rate swings as investors await US core PCE inflation data.

The Pound Sterling (GBP) is trading with minor gains against the US Dollar in Thursday’s European session. Market players are looking forward to the January core Personal Consumption Expenditure Price Index (PCE) from the United States. Which will be released at 13:30 GMT. Policymakers at the Federal Reserve (Fed) regularly monitor underlying inflation data as they prepare a new interest rate projection.

In the United Kingdom, policymakers at the Bank of England require further proof that inflation will fall to 2% before cutting interest rates.

The GBPUSD pair oscillates within Wednesday’s trading range due to uncertainty over the timing of Bank of England (BoE) rate reduction. keeping the pound sterling on the sidelines. Policymakers at the Bank of England are hesitant to cut interest rates too soon. Because it could delay progress in lowering inflation to the 2% objective or cause price pressures to flare up again.

Daily Market Movers: Pound Sterling Consolidates Amid Quiet Market.

The pound sterling trades flat around 1.2660 in a quiet market. As investors await the January core PCE Price Index from the United States.
The US core PCE Price Index data is estimated to have increased by 0.4% monthly. Compared to a 0.2% increase in December. Investors expect underlying inflation to slow to 2.8% per year, down from 2.9% previously.
The attractiveness for the US Dollar will increase if the core PCE Price Index data turned out to be more sticky than expected. This would allow Federal Reserve policymakers to tilt toward maintaining interest rates constant in the 5.25%-5.50% range for an extended period.

If US inflation data remains stubborn, GBPUSD will suffer.

If the Fed continues to raise interest rates, the US dollar will attract more overseas inflows. In Thursday’s European session. The US Dollar Index (DXY), which measures the value of the US dollar against six major currencies. Remained stable at approximately 103.80.
The Fed’s preferred inflation figures would have a substantial impact on market expectations on the timing of rate cuts.
On a broader scale, the pound sterling is projected to outperform the US dollar. As investors anticipate that the Bank of England would decrease interest rates later than the Fed.
Core consumer price inflation in the United Kingdom economy is 5.1%, the highest. in the Group of Seven nations, forcing BoE policymakers to retain a hawkish monetary policy stance for an extended period.
This week, BoE Deputy Governor Dave Ramsden stated that he wanted to assess how long inflation will linger before considering a change in monetary policy stance. In the most recent monetary policy meeting. Ramsden voted to keep interest rates at 5.25%.
The UK’s tenacious core inflation has been fueled by strong wage growth and high service inflation. However, annual shop price inflation fell to 2.5%. In February due to poor growth in food products. The lowest level since March 2022, which appears to provide some respite to households. The shop price index monitors price variations for both food and non-food items.