In Monday’s European session, the Pound Sterling (GBP) experienced slight declines but broadly consolidated within a tight range above 1.2600. The GBP/USD pair traded sideways as investors awaited the release of the United States Consumer Price Index (CPI) data for March, scheduled for Wednesday. This inflation data is expected to provide insights into whether the Federal Reserve (Fed) will commence interest rate reductions from June.
Meanwhile, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, marginally rose to approximately 104.30.
Market Dynamics and Expectations:
Market expectations regarding the Fed initiating a rate-cut cycle in June significantly diminished following Friday’s robust US employment report. The report indicated sustained labor demand by US employers despite the Fed maintaining higher interest rates within the range of 5.25%-5.50%. Strong payrolls data raised doubts regarding the progress in inflation declining to the 2% target, potentially enabling Fed policymakers to maintain their stance on higher interest rates and refrain from hasty rate cuts.
In the United Kingdom, investor expectations for the Bank of England (BoE) to commence interest rate reductions at the June meeting have intensified. This shift is fueled by mounting indications of easing price pressures. Notably, this week, market focus will be on the release of monthly Gross Domestic Product (GDP) and factory data for February, scheduled for Friday. A recent report by S&P Global/CIPS highlighted the UK Manufacturing Purchasing Managers’ Index (PMI) returning to growth after 20 consecutive months of contraction.
Daily Market Digest Highlights:
The Pound Sterling oscillated within a tight range around 1.2630 as investors awaited clarity regarding the timing of potential rate cuts by the Bank of England later this year. Recent data suggested a cooling down of inflation pressures, prompting market anticipation of rate adjustments possibly in June.
Concerns about a slowdown in the UK job market arose following a survey by the UK’s Recruitment and Employment Confederation, which revealed the slowest growth in starting salaries for permanent staff in over three years and a notable decline in spending on temporary workers.
Technical Analysis:
The Pound Sterling’s trading pattern suggests consolidation within a Falling Channel formation on a daily timeframe, with each pullback considered a selling opportunity by market participants. Support for GBP bulls is provided by the 200-day Exponential Moving Average (EMA) near 1.2570.
On the downside, the psychological support level of 1.2500, traced from the December 8 low, is expected to remain pivotal for the Cable’s movement.
The 14-period Relative Strength Index (RSI) hovers around 40.00, with a potential bearish momentum if the RSI decisively breaches this level.
