Sterling Rebounds Following Softer US PCE Data

The Pound Sterling bounces back strongly above 1.3400 against the US Dollar after soft US PCE inflation data. The Sterling surged against the US Dollar (USD) on Friday, buoyed by a surprising slowdown in US inflation. The unexpected decline in the Personal Consumption Expenditure Price Index (PCE), the Federal Reserve’s (Fed) preferred inflation gauge, suggests that price pressures may be easing.

However, the Fed’s commitment to reducing inflation remains steadfast. Despite the softer PCE data, market expectations for a 50-basis point interest rate cut in November have not been significantly altered. The central bank is still determined to bring inflation back down to its 2% target.

Meanwhile, the Bank of England (BoE) is expected to continue its monetary policy easing. While the BoE has already cut interest rates once this year, further reductions are anticipated as the UK economy navigates a challenging landscape. BoE Governor Andrew Bailey has indicated that interest rates will likely decline gradually, reflecting the central bank’s confidence in inflation returning to target.

The Pound Sterling will be influenced by both domestic and global factors. The UK economy’s performance, as well as developments in the US and other major economies, will play a crucial role in determining the GBP’s trajectory. Investors will also be closely monitoring the BoE’s upcoming monetary policy decisions.