The GBP/USD pair traded stronger, surpassing the 1.2600 level early on Thursday. Investor focus shifted towards the Global Purchasing Managers’ Index (PMI) figures in the United States and the United Kingdom for February.
The primary pair is currently trading around the 1.2638 zone, up 0.04% for the day.
It is worth noting that the minutes of the Federal Open Market Committee (FOMC) meeting for January, released yesterday, indicated that most officials emphasised the risks of moving too quickly to ease monetary policy, while some participants highlighted the risk of halting progress toward price stability.
FOMC officials emphasized the importance of accurately assessing incoming data to judge whether inflation is moving sustainably towards the ultimate 2% target.
From the Bank of England, Swati Dhingra stated on Wednesday that postponing interest rate cuts comes at the expense of individual’s living standards and may lead to a sharp decline in the British economy. She also reiterated that inflation in the UK is already on a steady downward path, emphasizing the need for monetary policy easing.
If inflation in the UK decreases rapidly, the technical recession that the UK economy entered last year is likely to have a weak impact. The central bank does not need stubborn inflation to return to the final 2% target before cutting interest rates. Optimistic comments from Bank of England governors and other officials are expected to provide some support for the British Pound and act as a fundamental strength for the GBP/USD pair.
The United Kingdom has officially entered a technical recession for two consecutive quarters of negative Gross Domestic Product (GDP) figures. In addition, the central bank needs at least another set of inflation data before determining the future path of its monetary policy, whether it will precede the Federal Reserve in interest rate cuts or not.
The US Dollar Index (DXY) continues its corrective downward trend, falling to around 104.00 points. Despite the support provided by the Producer Price Index (PPI) from the United States last Friday, the dollar closed the week with modest losses.
Today, investors and traders will be watching the S&P Global/CIPS Purchasing Managers’ Index in the United Kingdom and the S&P Global Purchasing Managers’ Index in the United States for February. Additionally, data on weekly initial jobless claims, existing home sales, and the National Activity Index from the Federal Reserve Bank of Chicago are scheduled for release.
Kocherlakota, Kashkari, Jefferson, and Harker from the Federal Open Market Committee are also scheduled to speak. This could cause extremely volatile price movements during today and tomorrow.
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