Daily digest market movers: Pound Sterling rises as US Dollar sees modest correction
- The Pound Sterling rebounds to 1.2650 against the US Dollar after discovering support near 1.2580. The GBP/USD pair discovers some buying interest as the US Dollar corrects after printing a fresh monthly high. The US Dollar Index (DXY), which tracks the US Dollar’s value against six major currencies, falls to 104.16. The USD Index corrects as expectations for the Federal Reserve (Fed) reducing interest rates in the June policy meeting increase as policymakers still have faith has inflation is easing.
- The Fed remains confident that underlying price pressures are easing. However, hot US inflation in January and February suggested that the path toward achieving price stability could be bumpier than expected. Higher rentals and service inflation have fed the stubborn US Consumer Price Index (CPI). About rent inflation, Fed Governor Lisa Cook said on Monday, "Although housing-services inflation remains quite high, the current low rate of increase on new rental leases suggests that it will continue to fall."
- Improved market sentiment has offered some relief to the Pound Sterling. However, the downside bias remains unabated as the Bank of England seems to be adopting a slightly dovish tone on interest rates. In the recent monetary policy meeting, no policymakers voted for a rate hike for the first time since September 2021. BoE policymaker Catherine Mann was expected to vote for a rate hike.
- BoE Governor Andrew Bailey said in an interview with the Financial Times last week that market expectations for rate cuts this year are not unreasonable and delivered an optimistic tone on the economic prospects. Over the inflation outlook, Bailey said "We are not seeing a lot of sticky persistence".
- This week, trading volume could remain low due to Good Friday. Also, the United Kingdom's economic calendar has nothing much to offer. However, the US core PCE Inflation data for February will be in focus.
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