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Market Analysis

Pound Sterling Stabilizes as Traders Shift Focus to US Core PCE Inflation
Amos Simanungkalit · 12.8K Views

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The British Pound (GBP) has found support above the key level of 1.2600 against the US Dollar (USD) during Thursday's London trading session. GBP/USD is stabilizing as the USD experiences a minor correction. The US Dollar Index (DXY), which measures the USD against a basket of major currencies, has pulled back slightly after reaching an eight-week high around 106.10.

Looking ahead, market sentiment towards the USD remains cautious as investors await the release of the US core Personal Consumption Expenditure (PCE) price index data for May, scheduled for Friday. The core PCE, a key inflation gauge for the Federal Reserve (Fed), is forecasted to show a slower month-on-month increase of 0.1% compared to 0.2% in April. Yearly, the underlying inflation rate is expected to ease to 2.6% from 2.8% in April.

A potential decline in PCE inflation, as anticipated by economists, could heighten expectations of the Fed starting interest rate cuts as early as September. According to the CME FedWatch tool, traders currently assign a 62.3% probability of an interest rate reduction, with expectations for two rate cuts by the end of the year. However, the Fed's recent dot plot suggests policymakers are signaling only one rate cut in 2024.

During Thursday's trading, investors will closely monitor US economic data releases including Initial Jobless Claims for the week ending June 21, revised Q1 Gross Domestic Product (GDP) figures, and Durable Goods Orders data for May.

 

 

 

 

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

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