Pound sterling remains strong against the US dollar on firm Fed rate decrease expectations for June.

The Pound Sterling (GBP) is trading sideways in Friday’s European session. As investors remain cautious ahead of February’s US Nonfarm Payrolls (NFP) data. Which will be released at 13:30 GMT. The overall appeal of the GBPUSD pair is optimistic. As markets largely expect the Federal Reserve (Fed) to decrease interest rates before the Bank of England (BoE). Which might Reduce the policy difference between them for a while. While market forecasts for a Fed rate decrease are for the June meeting.

Before shifting to policy normalization, BoE officials want inflation to fall to 2% on a sustainable basis.

Investors expect the BoE to lower interest rates in August. Inflation in the United Kingdom remains higher than in other developed countries in the Group of Seven (G-7) due to sticky services inflation. Which is driven by strong wage increases.

Next week, the UK’s average earnings statistics for the three months ending in January will provide new insight into the inflation outlook. Strong wage growth momentum would further limit rate-cutting forecasts. Policymakers at the Bank of England warned that wage growth is nearly beyond what is required to keep inflation at 2%.

Daily Market movers: Pound Sterling goes sideways after A robust rally.

The Pound Sterling vs. US Dollar trade is relatively stable after rebounding to round-level resistance at 1.2800. Investors are anticipated to remain on the sidelines ahead of February’s critical US employment report.
Economists expect US firms to add 200K jobs, down from 353K in January. The unemployment rate is expected to remain constant at 3.7%. Investors will also pay attention to the Average Hourly Earnings data, which will provide additional insight into the inflation picture.
Investors should be prepared for highly turbulent behavior, as a significant change in US employment figures would influence market expectations for a Federal Reserve rate drop at the June policy meeting.

Fed Chairman Powell believes the central bank is closer to gaining confidence that inflation will fall to the desirable level.

Expectations for a rate lowering decision in June remain strong. Fed Chairman Jerome Powell sounded less hawkish during his two-day speech before Congress.
The GBPUSD pair is expected to rise this week, owing to the US Dollar’s weakness. Next week, the Pound Sterling will be guided by the UK labor market data for the three months ending in January, which may provide some clues as to when the Bank of England will begin lowering interest rates. Currently, the market expects a rate drop at the August meeting.
Policymakers at the Bank of England have declined to set a time period for decreasing borrowing costs, stating such cuts are not appropriate until they are confident that inflation will return to the 2% objective on a sustainable basis.
Meanwhile, UK property prices have increased for the sixth consecutive month due to Mortgage rates have recently fallen, and rate cuts are expected in the near future. Halifax, the mortgage lender, stated that property prices increased by 0.4% month on month in February.