The Pound Sterling is facing pressure near 1.3400 against the US Dollar as investors await the US PCE inflation data for August. The Fed is expected to cut rates in November, but expectations for a 50 basis point cut have slightly decreased. The Bank of England is anticipated to cut interest rates once in the last quarter of the year, with Governor Andrew Bailey stating that interest rates will gradually decrease.
In Friday’s London session, the GBP/USD pair struggled to break above the resistance of 1.3400, with investors keeping an eye on the US core PCE index data. The US core PCE index is expected to show a year-on-year growth of 2.7%, impacting market speculation for Fed rate cuts in November. Market expectations for a 50 basis point cut have dropped slightly, with the Fed showing confidence in inflation returning to their target of 2%.
Despite the market focus on US inflation data, the Fed officials remain watchful of labor market risks. The Fed initiated a policy-easing cycle with a 50 basis point interest rate cut last week, indicating a strong determination to bolster the labor market. The US Dollar remains strong against major currencies, including the Euro, as the currency markets show varied movements against each other.
Investors are cautious as the Pound Sterling weakens against major peers, except Asia-Pacific currencies, ahead of the US PCE inflation data. With no significant UK economic data in sight, market focus shifts to the Bank of England’s potential monetary policy moves for the rest of the year. The BoE is expected to lower interest rates once in the remaining policy meetings, with Governor Bailey hinting at a gradual decrease in interest rates.
Technically, the Pound Sterling faces pressure near 1.3400 against the US Dollar, struggling to extend gains above the key resistance level. The near-term outlook remains positive, with the 20-day EMA offering support. The Cable is expected to face resistance near 1.3500, while the 20-day EMA will act as a key support level. Overall, the market remains cautious, awaiting key economic data releases and central bank decisions for further direction in the currency markets.
