Anna 
The Pound Sterling (GBP) edged closer to the psychological barrier of 1.2500 against the US Dollar (USD) during Thursday’s London session, driven by growing anticipation of a brighter economic outlook in the United Kingdom and a weakening US Dollar.
Investor sentiment towards the UK economy received a boost following the release of the preliminary PMI report from S&P Global/CIPS for April. The report indicated an increase in new business volumes across the private sector, with overall activity experiencing its strongest growth since May 2023. Notably, the expansion was predominantly driven by the service sector, although manufacturers reported a moderate downturn in order books.
Despite the recent positive developments, downside risks to the Pound Sterling persist as investors speculate that the Bank of England (BoE) may shift towards interest rate cuts before the Federal Reserve (Fed) takes similar action. BoE Governor Andrew Bailey’s remarks last week further fueled these expectations, as he expressed anticipation of a notable decline in next month’s inflation figures. Bailey attributed this anticipated drop to lower-than-expected oil prices and minimal impact from the Middle-East conflict, which he described as less severe than feared.
The Pound’s advance towards 1.2500 against the USD underscores growing optimism regarding the UK economy’s recovery, although lingering uncertainties surrounding monetary policy decisions by central banks continue to influence market dynamics.
