The Pound Sterling (GBP) trades subdued against the US Dollar (USD) in FridayÂ’s London session. The GBP/USD pair edges down this week as investors remain cautious ahead of the United States (US) core Personal Consumption Expenditures (PCE) Price Index data for May, which will be published on Friday.Â
The core PCE inflation data, the Federal ReserveÂ’s (Fed) preferred inflation measure, is estimated to have decelerated to 2.6% year-over-year (YoY) from AprilÂ’s reading of 2.8%. On a monthly basis, the underlying inflation is expected to have grown modestly by 0.1% against the prior increase of 0.2%.
Soft inflation figures would boost expectations of early rate cuts by the Fed, while hot numbers will diminish Fed rate-cut prospects and strengthen the US DollarÂ’s appeal. At the time of writing, the US Dollar Index (DXY), which tracks the GreenbackÂ’s value against six major currencies, trades close to the crucial resistance of 106.00.
According to the CME FedWatch tool, 30-day fed funds futures pricing data suggest that traders have priced in two rate cuts this year, and the policy-easing cycle will begin at the September meeting. On the contrary, Fed officials advocate for keeping interest rates at their current levels until they are convinced that inflation will decline to the desired rate of 2%.
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 more rate hikes if progress in disinflation appears to stall or reverse.
The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the strongest against the New Zealand Dollar.
 | USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF |
---|---|---|---|---|---|---|---|---|
USD | Â | 0.00% | -0.08% | 0.10% | 0.08% | 0.21% | 0.27% | 0.02% |
EUR | -0.00% | Â | -0.09% | 0.09% | 0.08% | 0.20% | 0.26% | 0.02% |
GBP | 0.08% | 0.09% | Â | 0.14% | 0.14% | 0.29% | 0.34% | 0.09% |
JPY | -0.10% | -0.09% | -0.14% | Â | -0.03% | 0.11% | 0.16% | -0.06% |
CAD | -0.08% | -0.08% | -0.14% | 0.03% | Â | 0.11% | 0.18% | -0.08% |
AUD | -0.21% | -0.20% | -0.29% | -0.11% | -0.11% | Â | 0.06% | -0.19% |
NZD | -0.27% | -0.26% | -0.34% | -0.16% | -0.18% | -0.06% | Â | -0.26% |
CHF | -0.02% | -0.02% | -0.09% | 0.06% | 0.08% | 0.19% | 0.26% | Â |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).
The Pound Sterling holds key support near 1.2600 against the US Dollar. The GBP/USD pair trades inside ThursdayÂ’s trading range as investors prefer to remain sideways ahead of the release of the US inflation data. The Cable declines toward the 200-day Exponential Moving Average (EMA), which trades around 1.2590.Â
The pair has dropped below the 61.8% Fibonacci retracement support at 1.2667, plotted from the March 8 high of 1.2900 to the April 22 low at 1.2300.
The 14-day Relative Strength Index (RSI) oscillates inside the 40.00-60.00 range, indicating a consolidation ahead.
Inflationary or deflationary tendencies are measured by periodically summing the prices of a basket of representative goods and services and presenting the data as the Consumer Price Index (CPI). CPI data is compiled on a monthly basis and released by the US Department of Labor Statistics. The YoY reading compares the prices of goods in the reference month to the same month a year earlier. The CPI Ex Food & Energy excludes the so-called more volatile food and energy components to give a more accurate measurement of price pressures. Generally speaking, a high reading is bullish for the US Dollar (USD), while a low reading is seen as bearish.
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