• The Pound Sterling falls to 1.2600 against the US Dollar as investors wait for US core PCE inflation data for February.
• The Fed’s preferred inflation gauge could give clues over when the Fed may begin the rate-cut cycle.
• UK’s soft inflation data for February has lifted expectations for BoE rate cuts in June.

The Pound Sterling (GBP) drops to 1.2600 against the US Dollar in Thursday’s European session. More broadly, the GBP/USD pair struggles for direction as investors wait for fresh cues about when the Bank of England (BoE) will begin reducing interest rates. The United Kingdom’s inflation has come down significantly, but BoE policymakers are expected to adopt a cautious approach as early rate cuts could revamp price pressures again.

Investors expect that the BoE will start cutting rates from the June meeting. The expectations have been prompted by sharply easing inflation in February. Also, no BoE policymakers see the need for more rate hikes, indicating that the current level of interest rates is sufficiently restrictive. Generally, the Pound Sterling weakens when investors expect the BoE will start reducing borrowing rates early.

Meanwhile, the UK Office for National Statistics (ONS) released on Thursday its revised Q4 2023 Gross Domestic Product (GDP) estimates, confirming that the economy contracted by 0.3% in the October-December period.

The US Dollar rises ahead of the United States core Personal Consumption Expenditure (PCE) Price Index data for February, which will be published on Friday. The measure, which gauges underlying inflation, is expected to have increased steadily by 2.8% on year.