Ella 
GBP/USD fell to multi-week lows of 1.2518 before rebounding to 1.2535 in early Asian trade on Tuesday. Expectations of an early interest rate cut by the Federal Reserve (Fed) have weakened, which has generally boosted the US dollar (USD). Meanwhile, the U.S. dollar index (DXY) held above 104.40 after retracing from year-to-date highs of 104.60.
The Institute for Supply Management (ISM) released a report on Monday saying that the U.S. ISM Services Purchasing Managers Index (PMI) climbed to 53.4 in January from 50.5 in December. Services Purchasing Managers’ Index data, along with labor market data, suggested a new period continued U.S. economic growth momentum in the fourth quarter of last year and reduced the likelihood of a rate cut in March.
On Monday, Huw Pill, chief economist at the Bank of England (BOE), said interest rates were likely to be cut this year in response to falling inflation. Peel added that monetary policy is now different from last year, with interest rates cut as long as inflation continues to fall.
Later on Monday, the UK’s BRC Retail Sales Index and the S&P Global/CIPS Construction Purchasing Managers’ Index for January will be released. In the absence of major economic data from the UK and US, market risk sentiment may play a key role in GBP/USD.
