The GBP/USD pair is trading around 1.2930 during Thursday’s Asian session, staying close to its 10-week low of 1.2907 hit on Wednesday. Market participants are eyeing the upcoming Purchasing Managers Index (PMI) data from both the United Kingdom (UK) and the United States (US) for potential market-moving insights later in the day.
Bank of England (BoE) Governor Andrew Bailey, speaking at the Institute of International Finance’s annual membership meeting in Washington, D.C., on Wednesday, commented that inflation in the UK is currently below target, partly due to base effects from last year. He also pointed out that the high savings rate signals cautious consumer behavior and stressed that pension funds should not be compelled to allocate investments solely to UK assets.
The slight recovery in the GBP/USD pair is largely driven by a modest pullback in the US Dollar (USD), which softened due to a dip in US Treasury yields. At the time of writing, the 2-year and 10-year US Treasury yields stand at 4.06% and 4.22%, respectively. Meanwhile, the US Dollar Index (DXY), which tracks the USD against six major currencies, reached 104.57 on Wednesday, its highest level since late July.
Despite the slight retreat in the USD, the Greenback may see further strength as signs of economic resilience and rising inflation expectations have lowered the chances of an aggressive rate cut by the Federal Reserve in November. The CME FedWatch Tool indicates an 88.9% likelihood of a 25-basis-point rate cut, with no expectations for a larger 50-basis-point cut.
As traders await PMI data releases, the GBP/USD pair remains sensitive to economic developments in both the UK and US, with potential for further movement depending on the data outcomes.
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