Home Forex GBP/USD Remains Defensive Below 1.2600, US Data Look, Powell's Fed Speech

GBP/USD Remains Defensive Below 1.2600, US Data Look, Powell's Fed Speech

by SuperiorInvest
  • GBP/USD is trading weaker near 1.2575 on Wednesday.
  • Many Fed officials see the three rate cuts this year as reasonable.
  • Traders raise their bets, BoE to cut interest rate ahead of US Fed this year, weighing on GBP.
  • The main highlights on Wednesday will be US ADP Employment Change, ISM Services PMI and Powell's Fed speech.

The GBP/USD pair is trading with a slight downside bias around 1.2575 despite the US dollar's decline on Wednesday. The major pair remains vulnerable due to slowing UK inflation and subdued market sentiment. Wednesday's Fedspeak will be closely watched by traders as it could offer some indication of the trajectory of interest rates and the policy outlook.

Many Fed officials spoke about the outlook for monetary policy on Tuesday. Cleveland Fed Bank President Loretta Mester said she still expects interest rate cuts this year, but ruled out the next meeting in May. San Francisco Fed President Mary Daly also expects to cut rates this year, but until there is more evidence that inflation has cooled. San Francisco Fed President Daly said three rate cuts this year are a “very reasonable baseline,” though nothing is guaranteed. Investors now see about a 65% chance of a rate cut by June, up from 70% after the Fed's March meeting, according to CME's FedWatch Tool.

On Tuesday, US February JOLTS Job Openings rose to 8.756 million in February from a downwardly revised 8.748 million in January, better than the market estimate. Meanwhile, factory orders improved to 1.4% month-on-month in February from a 3.8% drop in the previous reading.

On the other hand, traders raise their bets Bank of England (BoE) will cut interest rates this year ahead of the US Fed, which is putting some selling pressure on the pound sterling (GBP). Additionally, softening UK inflation and subdued market sentiment may weigh on the GBP and limit GBP/USD upside.

Market participants will keep an eye on the US ADP Employment Change, the final S&P Global Composite PMIand ISM Services PMI. The Fed's Bowman, Goolsbee, Barr, Kugler and Powell are also scheduled to speak later Wednesday. If Fed officials make any dovish comments, it could weigh on the dollar bill and create a tailwind for GBP/USD pair soon.

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