The Pound Sterling (GBP) traded weakly against major currencies on Friday, except for those in the Asia-Pacific region. The British currency was influenced by investor caution ahead of the release of the US Personal Consumption Expenditure Price Index (PCE) for August.
UK Economic Outlook and Interest Rate Expectations:
The Bank of England (BoE) is expected to lower interest rates in one of its two remaining policy meetings this year. The BoE recently cut rates by 25 basis points (bps) in August and left them unchanged in its September meeting.
BoE Governor Andrew Bailey has indicated that interest rates will likely decline gradually, reflecting confidence in inflation returning to the bank’s target of 2%. However, he emphasized that rates will not return to the historic lows seen during the pandemic.
Market Focus on US Inflation:
The US PCE data is expected to influence market speculation regarding the Federal Reserve’s (Fed) interest rate cuts in November. While the Fed is anticipated to lower rates, there remains uncertainty about the size of the cut.
Pound Sterling Technical Analysis:
The Pound Sterling (GBP) struggled to break above the 1.3400 level against the US Dollar (USD). The near-term outlook remains bullish, supported by a rising 20-day Exponential Moving Average (EMA). However, the 14-day Relative Strength Index (RSI) is declining, indicating potential for a pullback.
