Market Analysis

Ahead of US PCE data, the GBPUSD pair trades more softly, below 1.2530

Amos Simanungkalit · 26 Apr 202410.2K Views

During early Asian trading hours on Friday, the GBP/USD pair is trading weaker around 1.2502. Despite weaker US GDP growth figures, a slight rebound in the US Dollar is pressuring the major pair. The focus now turns to the US Personal Consumption Expenditures (PCE) Price Index data due on Friday.

Thursday saw the US economy expanding at a slower pace of 1.6% in the first quarter of 2024, down from 3.4% in the previous reading and below market expectations of 2.5%. However, inflation remains a concern, with the Personal Consumption Expenditures Price Index in Q1 rising at a 3.4% annual rate, exceeding the Fed's 2% target. Consequently, the Greenback dipped to two-week lows near mid-105.00 following the release of weaker Q1 GDP growth and higher-than-expected inflation.

According to the CME FedWatch tool, there is a less than 10% probability that the US Federal Reserve (Fed) will cut interest rates in June, while the likelihood of a rate cut in September is below 58%. Investors are eagerly awaiting another inflation report on Friday, with expectations for a 0.3% MoM increase in both headline and core PCE figures. Annually, the headline PCE and Core PCE figures are anticipated to show rises of 2.6% and 2.7% YoY, respectively.

Turning to the GBP, Bank of England (BoE) Governor Andrew Bailey and other policymakers noted that inflation in the UK fell in line with the central bank's projections, reducing the risk of elevated inflation and potentially paving the way for a rate cut. Market sentiment suggests the UK central bank may hold off until the next quarter to lower borrowing costs, likely preceding any move by the US Fed, which could limit the upside potential for the Pound Sterling (GBP).