• The Pound Sterling rises to 1.2500 on multiple tailwinds.
• BoE Governor Andrew Bailey expects a sharp drop in April’s inflation.
• The US Dollar remains under pressure ahead of US Q1 GDP and core PCE Inflation data.

The Pound Sterling (GBP) advances to near the psychological resistance of 1.2500 against the US Dollar (USD) in Thursday’s London session. The GBP/USD pair capitalizes on expectations of an improvement in the United Kingdom’s economic outlook and a decline in the US Dollar.

Investors’ confidence in the UK economy's outlook improved after the preliminary PMI report from S&P Global/CIPS for April showed that new business volumes increased across the private sector as a whole. The agency also reported that the rate of growth of overall activity was the strongest since May 2023. However, the expansion was centred on the service sector, as manufacturers saw a moderate downturn in order books.

Despite the recent upturn, downside risks to Pound Sterling remain high as investors expect the Bank of England (BoE) will pivot to interest-rate cuts before the Federal Reserve (Fed) does so. Last week, BoE Governor Andrew Bailey said: “I expect next month's inflation number will show quite a strong drop.” Bailey added that Oil prices haven't leaped as much as expected and that the effect of the Middle-East conflict “is less than feared.”