GBP/USD Remains Stuck at 1.2470, Focus on US Economic Data

In early Asian trading on Thursday, GBP/USD remained weak at around 1.2450. Weaker UK inflation data has fueled expectations that the Bank of England will begin cutting interest rates in the coming months, putting pressure on GBP/USD. Investors will get more clues from Thursday’s weekly U.S. jobless claims data, the Philadelphia Fed manufacturing index, the Conference Board’s leading indicator and existing home sales data.

The Bank of England signaled that the UK is still on track to cut interest rates as the latest data showed that price growth in the British economy has slowed further. On Wednesday, data from the Office for National Statistics showed that UK consumer price index (CPI) inflation fell to an annual rate of 3.2% in the 12 months to March, the weakest level in two and a half years. This was down from 3.4% previously. However, investors expect the Bank of England to cut interest rates in August or September, according to London Stock Exchange Group data.

In the U.S. dollar, upbeat February retail sales reported earlier this week pointed to a strong U.S. economy. The report sparked speculation that the Federal Reserve may delay its easing cycle this year. Federal Reserve Chairman Jerome Powell said he will wait longer than previously expected to cut interest rates after inflation data unexpectedly rose. Powell added that the Fed may need more time to gain confidence that price growth is heading towards the Fed’s 2% target before lowering borrowing costs. This in turn provides some support for the US dollar and limits the upside for GBP/USD.

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