- The British Pound rose against the US Dollar following the US Core PCE figures for May.
- Revised estimates of UK first-quarter GDP show the economy grew at a faster pace of 0.7%.
- Fed policymakers believe rate cuts at this time are inappropriate.
The British Pound (GBP) gains against the US Dollar (USD) in the American session on Friday. The GBP/USD pair rises slightly as the United States (US) core personal consumption expenditure (PCE) price index declined as expected in May.
PCE core inflation data, the Federal Reserve’s (Fed) preferred inflation measure, slowed to 2.6% year-on-year, as expected, from April’s reading of 2.8%. On a monthly basis, core inflation rose modestly by 0.1% compared to the previous increase of 0.2%.
Subdued inflation figures have weighed on the US Dollar (USD) and would raise expectations of early rate cuts by the Fed. At the time of writing, the Dollar Index (DXY), which tracks the value of the Greenback against six major currencies, is down at 105.80.
According to the CME FedWatch tool, 30-day federal funds futures price data suggest traders have priced in two rate cuts this year, with the policy easing cycle set to begin at the September meeting. In contrast, Fed officials advocate keeping interest rates at their current levels until they are convinced inflation will decline to the desired 2% rate.
On Thursday, Fed Governor Michelle Bowman reiterated that the central bank is not yet at a point where it is appropriate to reduce interest rates. She warned of further rate hikes if progress on disinflation appears to stall or reverse.
Daily Market Wrap: Sterling performs strongly as UK Q1 GDP expanded at a faster pace than previously thought
- The British Pound strengthened against all its peers after the UK Office for National Statistics (ONS) reported in its revised first quarter Gross Domestic Product (GDP) report that the economy expanded at a higher rate of 0.7% quarter-on-quarter (QoQ) than estimates and the preliminary release of 0.6%. On an annualised basis, the economy grew by 0.3%, revised up from 0.2%.
- Meanwhile, uncertainty ahead of the UK election and the timing of the Bank of England’s (BoE) rate cut will keep the British pound on edge. According to the latest exit polls, the opposition Labor Party is expected to win over the Conservative Party led by UK Prime Minister Rishi Sunak.
- For the BoE rate cut timeframe, investors expect a majority of policymakers to vote to cut interest rates at the next policy meeting on August 1. Policymaker Swati Dhingra and Deputy Governor Dave Ramsden have been supporting rate cuts, and it will be crucial to see which members join them.
- The reason for the high probability that the BoE will cut interest rates in August is the return of annual headline inflation to the bank’s target of 2%. However, price pressures in the services sector remain higher than necessary for rate cuts to be appropriate.
Price of the Pound Sterling today:
Pound Sterling PRICE Today
The table below shows the percentage change of the British Pound (GBP) against major currencies today. Pound sterling was the strongest currency against the Swiss franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.04% | -0.11% | -0.18% | -0.02% | -0.33% | -0.17% | 0.09% | |
| EUR | 0.04% | -0.07% | -0.12% | 0.02% | -0.30% | -0.14% | 0.12% | |
| GBP | 0.11% | 0.07% | -0.06% | 0.07% | -0.24% | -0.08% | 0.16% | |
| JPY | 0.18% | 0.12% | 0.06% | 0.12% | -0.17% | -0.02% | 0.25% | |
| CAD | 0.02% | -0.02% | -0.07% | -0.12% | -0.31% | -0.15% | 0.08% | |
| AUD | 0.33% | 0.30% | 0.24% | 0.17% | 0.31% | 0.16% | 0.40% | |
| NZD | 0.17% | 0.14% | 0.08% | 0.02% | 0.15% | -0.16% | 0.24% | |
| CHF | -0.09% | -0.12% | -0.16% | -0.25% | -0.08% | -0.40% | -0.24% |
The heatmap shows percentage changes of major currencies. The base currency is selected from the left column, while the quote currency is selected from the top row. For example, if you choose the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change shown in the chart will represent the GBP (base)/USD (quote).
Technical Analysis: British Pound Seeks to Recapture 61.8% Fibonacci Retracement Support
The British Pound holds key support near 1.2600 against the US Dollar. The GBP/USD pair is trading within Thursday’s trading range as investors prefer to stay on the sidelines ahead of the release of US inflation data. The Pound falls towards the 200-day EMA , which is trading around 1.2590.
The pair has fallen below the 61.8% Fibonacci retracement support at 1.2667, drawn from the March 8 high of 1.2900 to the April 22 low of 1.2300.
The 14-day RSI oscillates within the range of 40.00-60.00, indicating consolidation ahead.
Economic indicator
Underlying price index of personal consumption expenditure (YoY)
The underlying price index for personal consumption expenditure is published by the Bureau of Economic Analysis and is an estimate of the change in prices of a basket of goods that consumers buy each month. “Underlying” excludes products such as food and energy whose volatility depends on certain seasons, this way an accurate estimate of the change in prices is captured. It is considered an important indicator of inflation. The Federal Reserve believes that a reading within the 1% – 2% range would be in line with price stability policy. A reading above expectations is bullish for the dollar, while a reading below is bearish.
Last post: Fri Jun 28, 2024 12:30 PM
Frequency: Monthly
Current: 2.6%
Dear: 2.6%
Previous: 2.8%
Fountain: US Bureau of Economic Analysis
After the GDP report is released, the US Bureau of Economic Analysis publishes the personal consumption expenditures (PCE) price index data along with monthly changes in personal spending and personal income. FOMC policymakers use the annual Core PCE Price Index, which excludes volatile food and energy prices, as their primary gauge of inflation. A stronger-than-expected reading could help the USD outperform its rivals as it would hint at a possible sharp shift in the Fed’s forward guidance and vice versa.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
