Pound Sterling is holding steady as investors await cues on interest rates from the Bank of England (BoE). Concerns about high wage growth have BoE policymakers considering rate cuts. The easing of geopolitical tensions has reduced demand for safe-haven assets like the US Dollar.
The GBP/USD pair is consolidating with limited upside potential due to anticipated BoE rate cuts and a weakening US Dollar. The US Dollar Index, measuring the Greenback against major currencies, has fallen to 103.70.
Improving prospects for a ceasefire between Israel and Palestine have boosted risk sentiment, benefiting GBP, while safe-haven assets like USD have seen a decline in demand.
This week, the US Dollar’s direction will depend on US Durable Goods Orders and core Personal Consumption Expenditure (PCE) price index data for January. A significant drop in the US core PCE price index could fuel expectations of early rate cuts by the Federal Reserve (Fed).
Pound Sterling is struggling to break above the key resistance level of 1.2700 as investors await clarity on BoE’s rate decisions. BoE policymakers are closely monitoring wage growth, which is currently double the target needed to curb inflation, influencing their stance on interest rates.
Speculators have reduced bullish positions in Pound Sterling, indicating a search for fresh catalysts to drive the currency’s movement.
Although rate cuts by the BoE are expected after the Fed, the timing will depend on the UK’s economic outlook. Recent data suggests a shallow technical recession in the UK, with signs of recovery in the services sector and improved business optimism.
Consumer spending is also showing signs of improvement, with retail sales declining at a slower pace in February compared to January.
Technically, Pound Sterling faces resistance near 1.2700, with support around 1.2500. The currency is trading above key moving averages, with the RSI indicating potential bullish momentum if it surpasses 60.00.