As GBP/USD Extends Its Decline above 1.2600, Attention Turns to US PMI Data
The GBP/USD remains on the defensive near 1.2625 due to the USD's strengthening. The US Core PCE increased 2.8% year-over-year in January, as anticipated by the market, compared to 2.9% previously. On Friday, investors will closely observe the UK Nationwide Housing Prices and the concluding S&P Global Manufacturing PMI.

On Friday morning, the GBP/USD pair extends its decline below the mid-1.2600s during the early Asian session. The renewed demand for the US Dollar (USD) above the psychological threshold of 104.00 causes the major pair to decline. In February, investors will redirect their attention towards the final US S&P Global Manufacturing PMI. The GBP/USD pair is currently trading at 1.2625, an increase of 0.01% on the day.
The US Bureau of Economic Analysis (BEA) reported on Thursday that the Personal Consumption Expenditure (PCE) Price Index decreased from 2.6% to 2.4% year-over-year, which was consistent with market expectations. In addition, the Core PCE, the preferred inflation gauge of the Federal Reserve (Fed), increased by 2.8% year-over-year in January, matching the consensus estimate of 2.9, compared to December's reading of 2.9.
Recent inflation data, according to Atlanta Fed President Raphael Bostic, suggest that the path back to the central bank's 2% inflation target will be "tumultuous." Austan Goolsbee, president of the Federal Reserve Bank of Chicago, predicted that the initial rate decreases would occur later this year; however, he declined to provide a timeframe.
The market expects the Federal Reserve to initiate interest rate reductions by the summer. However, the timetable of the easing policy remains ambiguous, as inflationary pressures may surpass initial projections and persuade the Federal Reserve to maintain elevated interest rates. As a result, the Greenback may appreciate, which is detrimental to the GBP/USD pair.
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The Pound Sterling, on the other hand, may find some solace in the notion that the Bank of England (BoE) will transition to implementing rate reductions subsequent to the Federal Reserve (Fed). Dave Ramsden, deputy governor of the Bank of England, stated that he is unsure of the duration of the elevated inflation rate prior to contemplating a change in monetary policy.
The UK Nationwide Housing Prices report is anticipated to be released on Friday. The final S&P Global Manufacturing PMI and the final Michigan Consumer Sentiment will be released on the US agenda. Additionally, speakers include Williams, Logan, Waller, Bostic, Daly, and Kluger of the Federal Reserve.
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