• The Pound Sterling struggles to recover against the US Dollar as Fed rate cut prospects for June and July faded.
• UK monthly GDP data for February will provide cues about the current state of the economy.
• The BoE is expected to start lowering interest rates earlier than the Fed.

The Pound Sterling (GBP) finds some demand in Thursday’s London session after an intense sell-off that dragged the Cable to a two-month low near 1.2520. The near-term appeal of the GBP/USD pair has weakened as the US Dollar strengthens after traders dialled back bets supporting rate cuts by the Federal Reserve (Fed) in the June and July policy meetings.

Persistently higher United States Consumer Price Index (CPI) and Nonfarm Payrolls (NFP) data for March suggested that the Fed may not opt for rate cuts in the near term as these could ramp up price pressures. Also, the Federal Open Market Committee (FOMC) Minutes for the March meeting, released on Wednesday, indicated that policymakers remain worried about the inflation readings for the first two months of the year.

The US Dollar Index (DXY), which tracks the US Dollar’s value against six major currencies, prints a fresh more than four-month high near 105.30.

Meanwhile, waned Fed rate cut expectations for the June and July meetings have deepened fears of a prolonged policy divergence between the Fed and the Bank of England (BoE). The BoE is anticipated to begin reducing interest rates in June as inflation in the United Kingdom has slowed steadily for the last two months. Also, slower economic growth projections and easing labor market conditions would boost expectations for the BoE to pivot to rate cuts sooner. This scenario bodes poorly for the Pound Sterling.