Ella 
The GBP/USD outlook indicates a continued downward trend as the Pound remains close to 5-month lows following the release of US and UK economic data. While the US sees positive sales figures, the UK experiences a slight dip in wage growth.
The US dollar strengthened following the release of another set of encouraging economic indicators. March saw a significant rise in both retail and core retail sales, indicating robust consumer spending. These figures come on the heels of elevated inflation rates and a stellar jobs report, casting doubt on the downward trajectory of inflation and diminishing expectations of a Federal Reserve rate cut. Consequently, the probability of a rate cut in July has dwindled to 41%, while expectations for a cut in September have risen to 46%.
Despite high interest rates, demand in the US economy remains resilient, in contrast to most other major economies experiencing slowdowns and declining inflation rates. This discrepancy has led to a growing divergence in monetary policy outlooks among these economies.
On the other hand, the Pound weakened following the release of UK labor market data showing a modest slowdown. Core wage growth in the UK decelerated in the three months leading to February, providing further incentive for the Bank of England to consider rate cuts. Wages excluding bonuses grew by 6.0%, down from 6.1%.
However, the evolving rate cut outlook in the US has influenced the Bank of England’s stance on potential rate cuts. Investors are recalibrating their expectations for UK rate adjustments, as the possibility of delayed US rate cuts suggests a divergence in monetary policies. Any preemptive rate cuts by the BoE could exacerbate this policy discrepancy, potentially weighing further on the Pound.
