Market Analysis

GBPUSD has moderated its earlier gains, hovering around 1.2530 in the Asian trading session on Monday. The rebound in the US Dollar (USD) is driven by risk aversion ahead of the release of the ISM Manufacturing Purchasing Managers Index (PMI) data in the North American session, which is anticipated to cap the GBP/USD pair's upward momentum.

Federal Reserve (Fed) Chairman Jerome Powell's dovish comments on Friday have led to challenges for the US Dollar Index (DXY). Powell indicated that recent US inflation figures were as expected, affirming the Fed's stance on potential interest rate cuts throughout 2024. Fed officials maintain projections of three rate cuts this year, with market participants expecting the first cut to materialize at the June meeting.

US Core Personal Consumption Expenditures (PCE) for February met market expectations, with a 0.3% increase month-over-month (MoM), slightly lower than January's 0.5%. The annual index rose by 2.8%, also in line with expectations and slightly lower than the previous increase of 2.9%. US Headline PCE (MoM) saw a 0.3% increase, slightly below expectations, while the year-over-year PCE increased by 2.5%, meeting expectations.

Conversely, the Pound Sterling (GBP) is facing pressure amid expectations of the Bank of England (BoE) initiating three quarter-point rate reductions in 2024. This pressure is exacerbated by recent weaker economic data, indicating a recession in the UK economy in the latter half of 2023. BoE Governor Andrew Bailey's statement regarding potential interest rate cuts in future policy meetings has intensified this pressure.

With limited significant data releases expected from the United Kingdom (UK), traders are likely to assess the UK economic landscape through indicators such as Nationwide Housing Prices, S&P Global PMI, and Halifax House Prices data scheduled for release during the week.

Paraphrasing text from "FX Street" all rights reserved by the original author.