Ella 
GBP/USD remains above the psychological 1.2700 mark in early Asian trade on Tuesday. The GBP/USD rebound is underpinned by improving risk appetite. Investors will keep a close eye on Wednesday’s preliminary reading of the UK’s S&P Global Purchasing Managers’ Index for January, which is expected to remain positive. As of press time, GBP/USD was trading at 1.2713, up 0.04% on the day.
The Bank of England maintained its restrictive monetary policy stance, providing some support for Pound Sterling (GBP). All 70 economists in a Reuters poll said they expected the Bank of England to keep its policy rate unchanged at 5.25% at its February 1 policy meeting. However, with inflation expected to fall below target, the Bank of England is expected to cut interest rates to 5% in the second quarter of 2024, a faster cut than the third quarter proposed in a December poll.
The UK’s preliminary reading of the S&P Global Purchasing Managers’ Index for January will be released on Wednesday ahead of a key Bank of England meeting. The manufacturing PMI is expected to rise to 46.7 from 46.2, while the services PMI is expected to fall to 53.2 from 53.4. Finally, the Composite PMI is forecast at 52.2.
On the other hand, market confidence that the Federal Reserve will cut interest rates in March has weakened following strong U.S. economic data last week. Markets have priced in a 42% chance of a rate cut at the March meeting, according to the CME FedWatch tool.
