GBP/USD Strengthens Above 1.2600 Mark

In early European trading on Monday, GBP/USD remained above the psychological support level of 1.2600. GBP/USD rebounded on the back of a weaker U.S. dollar and lower U.S. Treasury yields. Investors are awaiting Thursday’s UK and US gross domestic product (GDP) releases for new catalysts. As of press time, GBP/USD was trading at 1.2605, up 0.03% on the day.

UK retail sales were better than expected and remained flat in February, data from the Office for National Statistics showed on Friday. The figure was higher than the consensus forecast of -0.3% and showed promising signs for the UK economy since it entered a technical recession after two consecutive quarters of contraction in the second half of last year. Market participants will get more clues from Thursday’s UK GDP growth data, which is expected to be -0.3% quarterly and -0.2% annualized in the fourth quarter. Stronger-than-expected UK data could boost Sterling (GBP) and act as a tailwind for GBP/USD.

On the other hand, markets are once again betting that the Federal Reserve (Fed) will initiate interest rate cuts in June, which could limit the upside for GBP/USD. Federal Reserve Chairman Jerome Powell reiterated last week that policymakers plan to cut interest rates by the end of the year as the economy continues to grow. Fed funds futures have priced in a 74.5% chance of a rate cut at the Fed’s June meeting, according to the CME FedWatch tool.

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