During the early Asian session on Friday, the GBP/USD pair remains subdued near the 1.2430 mark, reflecting the prevailing strength of the US Dollar (USD) fueled by robust US economic data and hawkish commentary from Federal Reserve (Fed) officials. The outlook for the pair has dimmed amid speculation that the Fed may postpone interest rate cuts until September.
Atlanta Fed President Raphael Bostic’s remarks on Thursday regarding elevated US inflation levels and the Fed’s stance on rate cuts have bolstered expectations for a delay in monetary policy adjustments. Bostic expressed comfort with exercising patience, suggesting potential rate cuts by year-end. Similarly, New York Fed President John Williams emphasized the Fed’s data-driven approach and downplayed the urgency for rate cuts. Consequently, investors have priced in a 66% likelihood of a rate cut by the Fed in September, according to the CME FedWatch Tool.
US economic data released on Thursday painted a mixed picture, with Initial Jobless Claims slightly increasing below market expectations, while the Philadelphia Fed Manufacturing Index surged in April, surpassing forecasts. However, Existing Home Sales disappointed, declining more than anticipated.
On the GBP front, concerns about a potential interest rate cut by the Bank of England (BoE) ahead of the Fed have contributed to selling pressure on the Pound Sterling (GBP) against the USD. Despite BoE policymaker Megan Greene’s remarks downplaying the immediacy of rate cuts and highlighting inflationary risks stemming from geopolitical tensions, the GBP struggled to recover from six-month lows.
Investor focus now turns to UK March Retail Sales data and speeches by BoE’s Ramsden and Breeden for further insights into the GBP’s trajectory. The GBP/USD pair is expected to remain under pressure amid lingering uncertainties surrounding central bank policies and economic indicators from both the US and the UK.
