The Pound Sterling (GBP) faces selling pressure near 1.2650 against the US Dollar early in Tuesday’s American trading session, with the latter finding renewed strength. The GBP/USD pair is declining due to rising expectations that the Bank of England (BoE) will adopt a more dovish stance this year following recent inflation data that came in lower than expected.
While the BoE stated last week that it has not reached a point where interest rate reductions are warranted, policymakers did acknowledge the market’s anticipation of two or three rate cuts in 2024. Two BoE members, Catherine Mann and Jonathan Haskel, previously known for their hawkish views, abandoned their calls for further rate hikes in March. This shift has reinforced the market’s belief that UK inflation is moving downward. In a statement released during Tuesday’s European session, BoE’s Catherine Mann explained that changing consumer behavior, a shift in labor market dynamics, and financial market indicators influenced her decision to change her stance.
This week, with a light UK economic calendar, market sentiment will likely dictate the Pound Sterling’s movements. US investors will be closely watching the release of the February core Personal Consumption Expenditure Price Index (PCE) on Good Friday. Analysts predict that annual Core PCE remained stable at 2.8%. The crucial support level of 1.2600 remains under pressure for the Pound Sterling. For the past four months, the GBP/USD pair has largely traded sideways within the 1.2500 – 1.2900 range. The 200-day Exponential Moving Average (EMA) at 1.2558 could offer some support for the bulls.
The 14-period Relative Strength Index (RSI) has pulled back after briefly touching 40.00. A sustained drop below this level could signal further bearish momentum.