Pound Sterling Steadies Above 1.2600 Amidst Awaited US CPI Data

In Monday’s European session, the Pound Sterling (GBP) exhibited slight downward movement but broadly consolidated within a tight range, hovering above the 1.2600 level. The GBP/USD pair traded sideways as investors awaited the release of the United States Consumer Price Index (CPI) data for March, scheduled for Wednesday. This key inflation indicator is expected to provide insights into the potential trajectory of interest rate adjustments by the Federal Reserve (Fed).

Meanwhile, the US Dollar Index (DXY), which gauges the Greenback’s strength against a basket of six major currencies, showed marginal gains, hovering around 104.30.

Market sentiment regarding the Fed’s likelihood of commencing a rate-cut cycle in June has significantly diminished following Friday’s robust US employment report. The report underscored the sustained strength in labor demand among US employers, despite the Fed’s current stance of maintaining interest rates in the range of 5.25%-5.50%. The robust payrolls data has raised doubts about the pace of inflation declining to the Fed’s 2% target, potentially allowing policymakers to uphold their stance of keeping interest rates elevated and refraining from precipitous rate cuts.

In the United Kingdom, anticipation regarding the Bank of England (BoE) initiating interest rate reductions from the June meeting has intensified amid growing indications of easing price pressures. Investors will closely monitor this week’s release of the monthly Gross Domestic Product (GDP) and factory data for February, scheduled for Friday. Recent data from S&P Global/CIPS revealed a return to growth in the UK Manufacturing Purchasing Managers’ Index (PMI) after a contraction spanning 20 consecutive months.

As economic indicators continue to shape market expectations, the Pound Sterling’s performance will be influenced by the forthcoming data releases, offering insights into the UK’s economic trajectory amidst evolving global economic dynamics.

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