POUND STERLING STAYS ON SIDELINES WITH EYES ON US CORE PCE INFLATION

30 May 2024, 12:38

The Pound Sterling exhibits choppiness around 1.2700 as the US core PCE Inflation comes under the spotlight.

UK’s high service inflation remains a barrier to the sustainable return of price pressures toward the 2% target.

Traders pare Fed rate-cut bets for September due to the stubborn inflation outlook.

The Pound Sterling (GBP) trades in a tight range near the round-level figure of 1.2700 against the US Dollar (USD) in Thursday’s European session. The GBP/USD pair is broadly under pressure due to uncertain market sentiment ahead of the United States (US) core Personal Consumption Expenditures Price Index (PCE) data for April, which will be published on Friday.

Sterling will seldom be influenced by market speculation about Bank of England (BoE) interest rate cuts, which financial markets expect will start from the August meeting. Earlier in the year, investors anticipated the BoE would begin lowering key borrowing rates in June. However, traders pare rate-cut bets for June after the United Kingdom (UK) Consumer Price Index (CPI) report for April showed that price pressures decelerated at a slower pace than estimates.

Though UK headline CPI has significantly declined, BoE policymakers still worry about a sharp slowdown in service inflation momentum, which is almost double the pace required to bring core inflation down to the 2% target.