Pound Sterling recovers as market Sentiment improves, while the US dollar Experiences a slight Pullback.
The Pound Sterling (GBP) rises beyond 1.2650 against the US Dollar in Tuesday’s London session. As the latter faces profit taking after Reaching new monthly highs. The GBPUSD pair Demonstrates a good rebound, even if Investors expect the Bank of England (BoE) to be more dovish this year than previously expected. Led by lower than expected inflation statistics in January and February.
BoE Bailey believes the market’s forecasts for two or three rate cuts are justified.
The Bank of England announced last week in According to its monetary policy statement. The central bank is not in a position to decrease interest rates. However, policymakers did not rule out the market’s expectation of two or three rate cuts this year. Two BoE policymakers, Catherine Mann and Jonathan Haskel. Who voted for rate hikes in February, reversed their hawkish views on interest rates at the March meeting. This has increased investor confidence that inflation in the United Kingdom is headed in the correct direction.
Meanwhile, in a statement made during Tuesday’s European session. BoE Catherine Mann stated that she amended her vote on interest rates due to consumers disciplining companies’ pricing. Shifting labor market dynamics, and the financial market curve. Mann stated, “Discretionary services inflation has moderated in the previous couple of months.” Mann further noted that market is pricing in too many cuts in interest rates.
This week’s US Dollar movements will be influenced by the core PCE price index data.
This week, the market sentiment will determine the Pound Sterling’s next move since the UK economic calendar is light. Investors will pay close attention to the United States’ core Personal Consumption Expenditure Price Index (PCE) data for February. Which will be released on Good Friday. The yearly Core PCE is expected to have increased at a constant rate of 2.8%.
Daily Market movers: Pound Sterling rises as US Dollar experiences mild retracement.
The pound sterling rebounds to 1.2650 against the US dollar after finding support near 1.2580. The GBPUSD pair sees modest buying interest as the US dollar corrects after reaching a new monthly high. The US The Dollar Index (DXY), which tracks the value of the US dollar against six major currencies, has fallen to 104.16. The USD Index falls as officials continue to believe that inflation is lowering, raising anticipation that the Federal Reserve (Fed) will lower interest rates at its June policy meeting.
The Fed is optimistic that underlying pricing pressures are receding. However, high US inflation in January and February signaled that the path to price stability could be more difficult than anticipated. Higher rental and service inflation have fueled the tenacious US Consumer Price Index (CPI). Fed Governor Lisa Cook stated on Monday that, “Although housing-services inflation remains quite high, the current low rate of increase on new rental leases suggests that it will continue to fall.”
Improved market Sentiment has provided some respite to the pound sterling.
Bank of England appears to take a little dovish stance on interest rates.
However, the downside bias persists as the Bank of England appears to take a little dovish stance on interest rates. For the first time since September 2021, no policymakers voted in favor of raising interest rates at the most recent monetary policy meeting. Catherine Mann, a BoE policymaker, was likely to vote for a rate increase.
In an interview with the Financial Times this week, BoE Governor Andrew Bailey stated that market expectations for rate reduction this year are justified and expressed optimism about the economy’s prospects. Bailey commented on the inflation prognosis, saying, “We are not seeing a lot of sticky persistence.”
Trading volume may stay low this week owing to Good Friday. Also, the United The Kingdom’s economic calendar does not have much to offer. However, the US core PCE inflation figures for February will be the emphasis.
