During the early Asian session on Friday, the GBP/USD pair lingered near 1.2550, maintaining a downward trajectory. The prevailing sentiment in the market suggests anticipation of an earlier interest rate cut by the Bank of England (BoE) compared to the US Federal Reserve (Fed), exerting downward pressure on the Pound Sterling (GBP) and the major currency pair.
Investors’ focus for the day centers on two key economic indicators: the UK monthly Gross Domestic Product (GDP) for February and the preliminary US Michigan Consumer Sentiment Index for April.
Speculation surrounding the timing and number of interest rate cuts by the Fed intensified following a hotter-than-expected CPI inflation reading earlier in the week. This has led to suggestions that the Fed may delay rate cuts, bolstering the US Dollar‘s position. Additionally, remarks from Fed officials indicating a belief that the central bank has reached the peak of the current rate-tightening cycle have further boosted the Greenback and dragged the GBP/USD pair lower.
On Thursday, the US Producer Price Index (PPI) data for March fell slightly below market expectations, with a 2.1% year-on-year increase, missing the estimated 2.2%. The core PPI, excluding volatile food and energy prices, rose by 2.4% year-on-year, slightly surpassing the market consensus of 2.3%.
Meanwhile, despite hawkish comments from BoE policymaker Megan Greene, the GBP failed to find support. Greene emphasized that interest rate cuts in the UK should remain distant due to persistent inflation pressure, which is perceived as more significant than in the US. She also dismissed market expectations of an earlier rate cut by the BoE compared to the Fed in the current year.
Investors are eagerly awaiting the UK GDP figures for February, which could offer insights into the state of the UK economy. Stronger-than-expected data might provide some support to the GBP and limit the downside of the GBP/USD pair.
