Daily digest market movers: Pound Sterling awaits US inflation for fresh guidance
- The Pound Sterling faces some sell-off while attempting to surpass the round-level resistance of 1.2700 amid uncertainty ahead of the United States consumer price inflation data for March.
- Annual headline inflation is forecast to accelerate to 3.4% from the 3.2% recorded in February. Core inflation, which strips off volatile food and energy prices, is expected to decelerate to 3.7% from 3.8% in the same period. On a monthly basis, both headline and core CPI are forecasted to have increased at a slower pace of 0.3% against 0.4% in February.
- The expected monthly rise in inflation would likely be insufficient to convince Federal Reserve (Fed) policymakers that inflation is returning to the desired rate of 2%. For inflation to come down to the 2% target, the monthly CPI needs to increase at a steady pace of 0.17% for the entire year.
- The US Dollar Index (DXY), which tracks the US Dollar’s value against six major currencies, rebounds to 104.15. Uncertainty among market participants ahead of the US inflation data offered support to the US Dollar. The inflation data will provide hints about when the Federal Reserve could start reducing interest rates.
- On the United Kingdom front, the rising burden of higher cost of living on households has prompted demand for rate cuts by the Bank of England. The latest survey by the Financial Conduct Authority (FCA) showed that individuals struggling to pay bills and credit repayments fell in January annually. The agency estimated that 7.4 million individuals faced problems in addressing their monthly expenses, lower than the 10.9 million recorded in January 2023 but still significantly higher than the 5.8 million recorded in February 2020.
- Investors expect the BoE to pivot to rate cuts after the June meeting. The speculation was propelled after Governor Andrew Bailey said market expectations for two or three rate cuts this year are “reasonable.”
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