Ella 
GBP/USD rebounded after falling for three consecutive trading days, while the US dollar trend remained stable. In Asia on Wednesday, GBP/USD rose to around 1.2630. International Monetary Fund (IMF) President Kristalina Georgieva made dovish remarks, and the dollar may once again face downward pressure.
In an interview with CNN on Tuesday, IMF chief Georgieva expressed optimism about the U.S. economy and advised Americans to “buck up.” Georgieva stressed that despite the strong labor market, interest rates are expected to moderately fall in 2024 due to falling inflation. The positive outlook suggests economic stress may be easing and provides a less aggressive outlook for the Federal Reserve’s interest rate trajectory.
The U.S. dollar index is likely to remain strong on rising U.S. Treasury yields. At press time, the coupon yields on 2-year and 10-year U.S. bonds rose to 4.32% and 3.94% respectively. Signs of weakening global economic growth in late 2023 initially led investors to seek the safety of the U.S. dollar. However, that changed as market participants reassessed aggressive bets that the Federal Reserve was about to cut interest rates.
Sterling is under selling pressure as the outlook for the UK economy remains bleak. The Institute of Directors’ Economic Confidence Index survey showed UK directors’ optimism about the UK economy over the next 12 months continued to decline, with the indicator falling to -28 in December from -21 the previous month. British business executives have urged the Bank of England (BOE) to quickly cut interest rates to provide support for the struggling economy.
S&P Global’s speech also increased market concerns, saying that UK manufacturing output will accelerate shrinking by the end of 2023. Market expectations are high that the Bank of England will cut interest rates from May 2024, reflecting the view that the UK economy is vulnerable to a technical recession.
U.S. data will be released on Wednesday, including the ISM manufacturing PMI for December, JOLTS job vacancies for November and the minutes of the Federal Reserve meeting. With no major UK economic data due this week, market participants will be watching for lower-impact events, including the December S&P Global/CIPS Composite Purchasing Managers’ Index and the Halifax House Price Index.
