Ella 
GBP/USD remains on the defensive around 1.2430 in early Asian trade on Wednesday. Federal Reserve Chairman Powell’s speech released a hawkish bias and the US retail sales data improved further, which caused the dollar to rise further, which put pressure on GBP/USD. Investors will get more clues from Wednesday’s UK Consumer Price Index (CPI).
Federal Reserve Chairman Jerome Powell said on Tuesday that monetary policy needs to remain restrictive for longer, further dampening investor expectations for clear interest rate cuts this year. Powell added that recent economic data clearly did not give the Fed greater confidence, and that it may take longer than expected to achieve that confidence. Since July 2023, the Federal Reserve has maintained its benchmark interest rate within a target range of 5.25% to 5.5%. Financial markets have had to reset expectations for rate cuts this year, with one or two cuts not expected until September.
On the other hand, investors expect the Bank of England to cut interest rates twice this year, with the first cut in August or September and earlier than the Federal Reserve. This has in turn put some selling pressure on the pound (GBP), weighing on the GBP/USD currency pair.
Bank of England Governor Andrew Bailey said on Tuesday there was strong evidence that British inflation was falling, and the question for policymakers remains how much more evidence is needed before cutting interest rates. Bailey further said that different inflation trends in the United States and Europe this year may lead to different interest rate paths.
