Ella 
In early Asian trading on Friday, GBP/USD continued its decline, falling below the mid-1.2600 level. Fresh demand for the greenback above the psychological 104.00 mark pushed GBP/USD lower. Focus turned to the final U.S. S&P Global Manufacturing PMI for February. As of press time, GBP/USD was trading at 1.2625, up 0.01% on the day.
Data released by the U.S. Bureau of Economic Analysis (BEA) on Thursday showed that the annual rate of the U.S. PCE price index dropped from 2.6% to 2.4%, in line with market expectations. In addition, the core PCE price index, the inflation indicator favored by the Fed, increased at an annual rate of 2.8% in January, compared with the previous value of 2.9%, in line with market expectations.
Atlanta Fed President Raphael Bostic said recent inflation data suggest the road to the central bank’s 2% inflation target will be “bumpy.”
The market expects the Federal Reserve to start cutting interest rates in the summer. However, the timing of easing policy is uncertain as inflation levels could be more stubborn than expected, which could convince the Fed to keep interest rates high. This could therefore boost the US dollar and weigh on GBP/USD.
On the other hand, speculation that the Bank of England (BOE) will cut interest rates later than the Fed may provide some support for Pound Sterling (GBP). Dave Ramsden, deputy governor of the Bank of England, said he wanted to focus on how long inflation would remain high before considering a shift in monetary policy stance.
