GBPUSD fell below 1.2300 following US data, despite a strong USD.
The Pound Sterling (GBP) fell for the third day in a row versus the US Dollar (USD),despite a report from the Commerce Department showing that inflation continued to drop, raising hopes that the (Fed) rate rises would be scaled down. https://voiceoftraders.com/news/forex/pound-sterling-vs-dollar-gbpusd-weakened-more-ahead-of-the-feds-meeting
After the employment cost figures cooled, Wall Street rose. Meanwhile, the US Dollar Index, which measures the value of the American Dollar (USD) relative to its rivals, has recovered some of its losses and is now up 0.08%, at 102.316, providing support for the GBPUSD.
As the Employment Cost Index falls, US inflation continues to fall.
The US Department of Labor (DoL) said that the Employment Cost Index (ECI), which Fed policymakers use to gauge labor-market inflation, fell from 1.2% to 1% year on year. Today’s data, when combined with last week’s US Core Personal Consumer Expenditure (PCE).
Another inflation index monitored by the Fed, showed a fourth consecutive month of decline, from 4.7% YoY to 4.4%. Anticipation has grown that the Fed would raise rates by 25 basis points during its two-day meeting, which begins today and concludes on Wednesday with the issuance of the US central bank’s monetary policy statement.
As stated by the International Monetary Fund, the UK economy will enter a recession in 2023.
The UK’s economic docket was missing from the docket across the pond. However, news outlets stated that the IMF predicted that the British economy will enter a recession.
According to the IMF, the GDP would contract by 0.5% between the fourth quarter of 2022 and the fourth quarter of 2023. It should be noted that the IMF has adjusted its predictions and expects the global economy to grow. The economy is expected to rise by 2.9% this year, up from 2.7% last year, owing to economic resiliency and China’s reopening.
Given the circumstances, monetary policy choices by the Federal Reserve and the Bank of England would have a significant impact on the GBPUSD (BoE). The Fed is expected to move first on Wednesday. While the Bank of England is expected to hike rates by 50 basis points (bps), leaving the Bank Rate at 4%.
Most analysts believe this will be the last rise by the Bank of England, which might lead to some Sterling weakening since US interest rates are likely to peak at 5%.
