GBP/USD shows positive momentum on Monday, trading around 1.2930, boosted by a small decline in the US Dollar. The pair has rebounded from a recent low, with significant support drawn from the Bank of England’s position on interest rates.
While the US Dollar experiences a setback, the Fed’s inflation forecast suggests a possible slowdown in rate increases. Conversely, the BoE’s cautious stance against rate cuts and an upward revision in inflation expectations provide further backing for GBP.
Market Anticipation For PMI Data
Traders await upcoming PMI data from the UK and the US, alongside comments from key monetary figures, which may influence short-term market movements. The current levels remain close to the highest point since November, indicating potential for further gains.
The Composite Purchasing Managers Index (PMI) is an essential indicator reflecting the UK’s private-business activity across manufacturing and services. A figure above 50 indicates economic expansion, while below 50 suggests a contraction, positioning the GBP accordingly. The preceding PMI reading was 50.5, with the next scheduled release on 24 March 2025.
What we see here is a pair finding support from a shifting stance on interest-rate expectations. The pound is holding firm amid a weakened dollar, stemming from speculation that the Federal Reserve may take a softer approach towards inflation. Meanwhile, the Bank of England appears more reluctant to consider rate cuts, and that alone bolsters sentiment for sterling. Higher expected inflation in the UK does little to encourage monetary easing, which has kept traders leaning towards the pound.
Looking ahead, all eyes should be on the upcoming PMI data. This indicator covers both manufacturing and services, offering a broad measure of economic conditions. A reading above 50 signals growth, while a dip below suggests contraction. The last print came in at 50.5, barely above the threshold, meaning any surprise—either up or down—could have a swift impact. With the next release set for 24 March 2025, traders should be prepared for increased movement as forecasts adjust.
Impact Of Central Bank Policies
Beyond data releases, speeches from key monetary-policy figures will likely add to market fluctuations. Recent movement in the currency pair follows expectations rather than immediate policy changes, leaving it vulnerable to shifts in sentiment. As the exchange rate hovers near its highest level since November, momentum traders will be watching closely for a push higher. Whether the pair holds its ground or reverses course depends not only on incoming data but also on how central bankers respond to inflation risks in the coming weeks.
