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The GBP/USD pair is on the defensive near 1.2350 during the early Asian session, with the USD Index consolidating gains above 106.10 as traders await preliminary S&P Global Purchasing Managers Index (PMI) data from the US and UK for April.
Fed policymakers agree that inflation in the US is slow but still high, and the US central bank is not in a hurry on interest rate cuts. Atlanta Fed President Raphael Bostic noted that interest rates will have to be kept at a “restrictive level” and might only ease “at the end of 2024.”
Chicago Fed President Austan Goolsbee signaled a longer timeline for rate cuts as progress on inflation had “stalled.” The hawkish stance of the Fed on interest rates has boosted the US Dollar (USD) and created a headwind for the GBP/USD pair.
The focus will shift to the April PMI reports, which are projected to improve both manufacturing and services PMI figures. Interest rate futures are fully priced in a first quarter-point interest rate cut by the Bank of England for August and see two rate cuts before the end of the year.
