Dollar Strengthens Ahead Of Non-Farm Payrolls, Pound Under Pressure

GBP/USD fell back to 1.2620 during the London session on Friday, failing to regain round-number resistance at 1.2700. GBP/USD fell as rising geopolitical tensions and caution among market participants ahead of the U.S. March non-farm payrolls (NFP) report boosted demand for the greenback.

Increasing uncertainty over when the Federal Reserve (FED) will start cutting interest rates has investors on edge. On Thursday, Minneapolis Fed President Neel Kashkari said an interest rate cut would not be needed this year if inflation remains stagnant. Kashkari also said he was predicting two rate cuts in 2024 in his latest dot plot.

Meanwhile, slower UK inflation expectations are also weighing on the pound. The latest survey from the Bank of England’s (BoE) Policymakers Panel (DMP) for February shows that most businesses believe sales prices and wage inflation will cool next year. Sales price expectations fell to 4.1% from 4.3%, the lowest in more than two years. On a three-month moving average basis, wage growth expectations fell to 4.9% from 5.2% in February.

A slowdown in inflation expectations is expected to boost expectations for a rate cut at the Bank of England’s June meeting. Increased hopes of an early interest rate cut by the Bank of England have a negative impact on the pound.

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