Market Analysis
The GBP/USD pair has paused its three-day losing streak, currently trading around 1.3140 during Monday’s Asian session. The US Dollar (USD) is under pressure due to improved market sentiment, driven by rising dovish expectations surrounding the US Federal Reserve (Fed).
However, July's US Personal Consumption Expenditures (PCE) Index data has caused traders to temper their expectations for an aggressive rate cut by the Fed in September. The PCE Price Index rose by 2.5% year-over-year in July, matching the previous reading but missing the expected 2.6%. Similarly, the core PCE increased by 2.6% year-over-year, consistent with the prior figure, but slightly below the consensus forecast of 2.7%.
According to the CME FedWatch Tool, there is a 70.0% probability that the Fed will implement at least a 25 basis point (bps) rate cut at its September meeting. Market participants are now likely to turn their attention to the upcoming US employment data, including August's Nonfarm Payrolls (NFP), for further clues on the Fed's potential rate-cut trajectory.
On the GBP side, the Bank of England (BoE) is anticipated to gradually lower interest rates throughout the remainder of the year, which could help support the Pound Sterling (GBP). Speaking at the Jackson Hole Symposium, BoE Governor Andrew Bailey noted that the secondary effects of inflationary pressures are expected to be less severe than previously thought. However, Bailey also cautioned against rushing into additional rate cuts, according to Reuters.
Paraphrasing text from "FX Street" all rights reserved by the original author.