Ella 
In early Asian trading on Wednesday, GBP/USD rose above the 1.2600 mark. Upbeat comments from Bank of England Governor Andrew Bailey boosted the pound. GBP/USD is trading around 1.2625, unchanged throughout the day.
Last week’s U.S. producer price index (PPI) data for January showed rising inflationary pressures in the U.S. economy, and investors lowered their bets on an interest rate cut by the Federal Reserve (Fed). Markets expect the Federal Reserve to initiate interest rate cuts at its May-June monetary policy meeting. The minutes of the Federal Reserve’s January policy meeting may provide some signals on the Fed’s interest rate path.
On Tuesday, Bank of England Governor Bailey testified on inflation and the economic outlook. Bailey said he agreed that investors were betting on a rate cut this year, but pointed to signs that the British economy was recovering after falling into recession at the end of 2023. He also pointed out that inflation does not need to be below 2% before cutting interest rates, and it is not unrealistic to expect an interest rate cut this year, but he did not provide a precise time point.
Looking ahead, Wednesday’s Federal Reserve meeting minutes will be in focus, which may provide more insight into why Fed policymakers are not confident enough to initiate easing in the first quarter of 2024. The preliminary value of the US S&P Global Purchasing Managers Index for February will be released on Thursday. These events could provide a clear direction for GBP/USD.
