- The Pound Sterling moves higher against the US Dollar (USD) to around the round-level resistance of 1.2700. The GBP/USD pair holds recovery from a five-week low of 1.2620 as the US Dollar (USD) has corrected due to firm speculation that the Federal Reserve (Fed) will start cutting interest rates from the September meeting. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, drops to 105.40 from a seven-week high of 105.90.
- According to the CME FedWatch tool, 30-day Federal Funds Futures pricing data indicates that there will be two rate cuts and the central bank will lower borrowing rates subsequently in the November or December meeting.
- Contrary to market expectations, Fed officials expect only one rate-cut this year as they say they want to see inflation declining for months before pivoting to policy normalization. In an interview with CNBC on Monday, Chicago Fed Bank President Austan Goolsbee said that he is “very optimistic” about a further improvement in the inflation data, which will open room for potential rate cuts.
- On the economic data front, investors will focus on the core US core Personal Consumption Expenditure price index (PCE) for May, which will be published on Friday. The core PCE price index data is the Fed’s preferred inflation measure, and it is expected to provide fresh cues on when the central bank will start reducing interest rates this year. Soft figures would boost expectations of the Fed to begin easing borrowing rates from September, while hot numbers will likely delay any rate cuts towards the end of the year
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