In Thursday’s London session, the Pound Sterling (GBP) maintained a narrow range around 1.2800 as investors awaited further guidance on the Bank of England‘s (BoE) stance on interest rates. The GBP/USD pair traded sideways, with investors closely monitoring developments regarding potential rate adjustments from both the BoE and the Federal Reserve (Fed).
The immediate outlook for the Cable remains uncertain, particularly as recent United States inflation data for February has fueled concerns that the Fed may postpone plans to reduce interest rates. Presently, market expectations lean towards the Fed making such adjustments in June.
Concurrently, the US Dollar Index (DXY) saw a rebound to 102.90 ahead of the release of crucial US economic data including the Producer Price Index (PPI) and Retail Sales figures for February, scheduled for publication at 12:30 GMT. These indicators are anticipated to offer fresh insights into the Fed’s timeline for rate cuts this year.
In other market movements, the Pound Sterling continued to consolidate within a narrow range around 1.2800 against the US Dollar. This comes following Wednesday’s release of UK monthly Gross Domestic Product (GDP) and factory data for January, which revealed a 0.2% growth in the economy as expected. Notably, higher demand at retailers and increased sales of house-building materials contributed to this growth, although Industrial Production remained lackluster.
The anticipated growth in the UK economy at the onset of 2024 has provided some relief to UK Prime Minister Rishi Sunak ahead of upcoming elections, slated to be held no later than the end of January 2025. Chancellor of the Exchequer Jeremy Hunt expressed optimism, stating, “While the last few years have been tough, today’s numbers show we are making progress in growing the economy,” as reported by Reuters.
Although the UK economy has rebounded after entering a technical recession in the latter half of 2023, it remains premature to conclude the depth of the recession and the extent of the recovery until comprehensive data for the first quarter indicates sustained expansion. The Office for Budget Responsibility (OBR) forecasts a modest 0.8% growth for the UK economy in 2024.
Looking ahead, market sentiments regarding potential rate cuts by the Bank of England will continue to influence the Pound Sterling’s trajectory. Investor speculation has intensified on the possibility of rate reductions during the August meeting, particularly in light of slower-than-anticipated wage growth in the three months ending January.
