The GBP/USD pair is trading near 1.2790 as the US dollar rebounds. This comes after the Federal Reserve hinted at potentially cutting interest rates twice this year as the US economy showed slower growth in the first quarter. The ISM Services PMI in the US improved to 53.8% in May from 49.4% in April, beating expectations. In contrast, the UK Services PMI dropped to 52.9 from 55.0 in April, signaling slower growth in the UK economy. These factors are influencing the movement of the GBP/USD pair.
With the expectation of the Fed cutting rates in September, the US dollar is facing pressure. Fed officials have expressed the need to keep rates higher until inflation reaches the target of 2%. However, with weaker economic data and the possibility of a rate cut, the US dollar is losing ground. Market expectations for a rate cut in September have increased to nearly 70%, up from 54.9% at the beginning of the week.
The upcoming release of US weekly Initial Jobless Claims and Balance of Trade data will provide further insight into the economic situation in the US. The focus will be on how these reports may impact the Fed’s decision on interest rates. In the absence of major economic data from the UK, the movement of the GBP/USD pair will be driven by the performance of the US dollar. Traders will be closely watching for any developments that may influence the direction of the currency pair.
The US dollar’s strength is also being tested by concerns over the ongoing trade tensions with China and other global factors. These uncertainties are contributing to a more cautious approach by the Federal Reserve, leading to speculation of a rate cut. The recent downbeat US economic data, including the weaker Q1 GDP, has further fueled expectations of easing monetary policy by the Fed.
In conclusion, the GBP/USD pair is holding steady around 1.2790 as the US dollar faces pressure from expectations of a rate cut by the Federal Reserve. The US economy showed signs of slower growth in the first quarter, while the UK services sector also reported weaker growth. Traders are closely monitoring economic data releases and Fed statements for any signals that may impact the movement of the currency pair. The ongoing trade tensions and global uncertainties are adding to the complexities of the forex market, leading to a more cautious outlook by central banks.
