Pound Sterling Consolidates Ahead of Key US Inflation Data

: George Solotarov; 08 April 2024; Hits: 149

Pound Sterling Consolidates Ahead of Key US Inflation Data

The Pound Sterling (GBP) trades within a narrow range above 1.2600 early Monday as markets await Wednesday's release of the US Consumer Price Index (CPI) report for March. This inflation data will offer crucial insights into the potential timing of Federal Reserve (Fed) rate cuts.

US Dollar Edges Higher, Rate Cut Expectations Shift

The US Dollar Index (DXY) exhibits a slight upward bias near 104.30. Friday's robust US jobs report casts doubt on previous expectations of an imminent, June Fed rate cut. The data showed persistent strength in the labor market despite the Fed's current stance of maintaining higher interest rates within the 5.25%-5.50% range.

Persistently strong wage growth and labor demand could hinder progress towards the Fed's 2% inflation target, allowing policymakers to justify maintaining higher rates and delaying any cuts.

UK Outlook: BoE Rate Cuts, GDP Data Loom

In the UK, expectations for a Bank of England (BoE) rate cut as early as June have deepened amid signs of easing price pressures. This week, Friday's release of February's Gross Domestic Product (GDP) and manufacturing data will provide further direction for the GBP. The recent S&P Global/CIPS report showing a return to growth in the UK manufacturing PMI offers a positive signal.

Technical Analysis: GBP/USD Holds Above 1.2600

GBP/USD remains contained within a Falling Channel formation on the daily timeframe, with pullbacks viewed as selling opportunities. The 200-day Exponential Moving Average (EMA) near 1.2570 offers support, as does the key psychological level of 1.2500. A decisive break below the 14-period Relative Strength Index (RSI) level of 40.00 could trigger further bearish momentum.