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GBP/USD rebounded from recent losses and traded near 1.3280 during Asian session Thursday. The pair was supported by a weaker US dollar (USD) as investors weighed ongoing trade-related uncertainties despite a slight easing of tensions. Market focus now turns to US retail sales and producer price index (PPI) data due later in the day.
Market speculation that Washington may prefer a weaker dollar to bolster its trade position. The Trump administration has argued that a strong dollar puts US exporters at a disadvantage relative to weaker regional currencies.
However, downside pressure on the dollar may be limited. Improved global trade sentiment has eased recession fears and reduced expectations for aggressive rate cuts from the Federal Reserve (Fed). Markets now price in a 74% chance of a 25 basis point rate cut in September, down from previous forecasts for a July cut, according to LSEG.
Meanwhile, the British pound (GBP) remained stable as traders reassessed the Bank of England (BoE) policy outlook following the release of labor market data for the three months to March on Tuesday. The report showed slower job growth, a rise in the unemployment rate and slower wage growth, suggesting employers cut back on hiring ahead of higher social security contributions that took effect in April.
Nonetheless, modest wage growth could provide some relief to BoE policymakers. Wage trends remain a key indicator of services sector inflation, which continues to drive underlying price pressures in the UK.
Traders are closely watching preliminary first-quarter UK gross domestic product (GDP) and factory data due on Thursday. The economy is expected to grow 0.6% in the first quarter of 2025, a significant acceleration from the 0.1% expansion in the last quarter of 2024.
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