Daily Digest Market Movers: Pound Sterling awaits UK/US Manufacturing PMI data
- Pound Sterling discovers interim support near 1.2600 after a sharp sell-off. The downside remains favored amid a cautious market mood.
- The US Dollar Index, which measures Greenback’s value against six major currencies, remains firm above 104.00.
- The market sentiment is slightly uncertain as the United States core PCE Price Index data for January, released on Thursday, was in line with expectations. The annual core inflation data indicated that inflation is gradually declining but is insufficient to allow Federal Reserve policymakers to favor normalization of policy stance at the current stage.
- The annual core PCE Price Index was the lowest in three years at 2.8%, as expected by market participants. The monthly core inflation data grew in line with expectations by 0.4%. The pace at which monthly price pressures rose is higher than what is required to bring down inflation to the 2% target.
- The underlying inflation data has kept hopes of rate cuts in the June meeting alive. As per the CME FedWatch tool, traders see a 52% chance for a rate cut by 25 basis points (bps). The probability of a rate cut in June remains unchanged after the release of the crucial inflation data.
- On the United Kingdom front, investors seek fresh cues about when the Bank of England will start reducing interest rates.
- The latest poll from Reuters showed that a rate-cut move from the BoE will come in the third quarter of this year. A slim majority is expecting it in the month of August.
- Currently, BoE policymakers believe that rate cuts would be discussed only after gaining confidence that inflation will come down to the desired rate of 2%.
- BoE policymakers are worried about the pace at which wage growth and service inflation are rising. The momentum in the aforementioned inflation indicators is higher than necessary for returning inflation sustainably to the 2% target.
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