Market Analysis

The GBP/USD pair dipped to 1.2895 during Asian trading hours on Thursday, with the Pound Sterling (GBP) facing downward pressure due to increased expectations that the Bank of England (BoE) might initiate interest rate cuts in August. In the absence of significant UK economic data, the GBP/USD pair is likely to be influenced by developments in the US.

Economists in a Reuters poll widely anticipate that the BoE will lower the bank rate to 5% at its meeting next week. JP Morgan analyst Allan Monks commented, "We expect a 25 basis point rate cut at next week's meeting, though the decision now appears much closer than it did a few weeks ago. The argument for lower rates is still not entirely convincing."

On the other hand, market participants expect the US Federal Reserve (Fed) to maintain its current rates at its July meeting, but foresee a potential start to monetary policy easing in September, which could lower the Federal Funds Rate to the 5.00%-5.25% range.

This week, investors will closely watch key US economic data for further insights. On Wednesday, the preliminary S&P Global PMIs for July are expected to provide clues about the rate outlook. The Manufacturing PMI is forecasted to increase to 51.7 in July from 51.6 in June, while the Services PMI is predicted to decrease slightly to 54.4 from 55.3. Additionally, the first estimates of US second-quarter Gross Domestic Product (GDP) and the Personal Consumption Expenditures (PCE) Price Index for June will be released later this week.

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