The Pound Sterling has strengthened against the US Dollar as the US core PCE Inflation for May declined, causing the GBP/USD pair to rise slightly. The Federal Reserve’s preferred inflation measure, the core PCE inflation, decreased to 2.6% year-over-year as expected. This soft inflation data has weighed on the US Dollar, leading to expectations of early rate cuts by the Fed.
Meanwhile, revised UK Q1 GDP estimates show that the economy grew at a higher pace of 0.7%. This news has bolstered the Pound Sterling, which has performed strongly against its peers. However, uncertainty surrounding UK elections and the timing of a Bank of England rate cut continue to keep the Pound Sterling on edge.
Fed policymakers do not believe rate cuts are currently appropriate, with Fed Governor Michelle Bowman emphasizing that interest rates should remain unchanged until inflation reaches the desired rate of 2%. On the other hand, market expectations indicate that the BoE may lower borrowing rates in August due to the return of annual headline inflation to the bank’s target.
In technical analysis, the Pound Sterling aims to recapture 61.8% Fibo retracement support against the US Dollar. The GBP/USD pair is trading near key support levels and investors are awaiting the release of US inflation data.
Overall, the Pound Sterling has performed strongly against the US Dollar and other major currencies, driven by positive economic indicators and market expectations.