During the early European session on Monday, the GBP/USD pair remains in favorable territory above the psychological support level of 1.2600. The pair’s resilience is attributed to a softer US Dollar (USD) and declining US Treasury bond yields. Market participants are eagerly awaiting the release of Gross Domestic Product (GDP) figures from both the UK and US later in the week, which could serve as fresh catalysts for the currency pair. As of the latest update, GBP/USD is trading at 1.2605, reflecting a marginal increase of 0.03% for the day.
Recent data from the Office for National Statistics revealed that UK Retail Sales surpassed expectations by remaining flat in February. This result, which exceeded the market consensus of a 0.3% decline, indicates positive economic signs for the UK. Particularly noteworthy is the fact that this performance comes on the heels of the country’s technical recession, marked by two consecutive quarters of economic contraction in the latter part of the previous year. Market sentiment is now pivoting towards the upcoming UK GDP growth figures expected later this week, which are projected to show a 0.3% quarter-on-quarter contraction and a 0.2% year-on-year decline in the fourth quarter. Any outperformance in these figures could provide a boost to the Pound Sterling (GBP), thereby supporting further gains for the GBP/USD pair.
Conversely, the US Dollar’s upside potential may be curtailed by growing expectations of interest rate cuts by the Federal Reserve (Fed). Fed Chairman Jerome Powell reiterated last week that policymakers are considering rate cuts before year-end, contingent upon sustained economic growth. According to CME Group’s FedWatch tool, Federal Funds Futures are pricing in a 74.5% likelihood of a rate cut during the June meeting.
Market focus for Monday includes the release of the Chicago Fed National Activity Index and US New Home Sales for February. Additionally, speeches by Fed’s Raphael Bostic and BoE’s Catherine Mann are anticipated later in the day. However, the spotlight remains on Thursday’s unveiling of GDP growth figures from both the UK and US, events that could provide definitive guidance for the GBP/USD pair’s trajectory.
