- Sterling retreats slightly amid quiet session as traders eye upcoming UK GDP figures.
- DXY softens to 100.77 after early week rally on US-China tariff truce; easing bets hold at 52 bps for 2025.
- Fed’s Jefferson flags tariff-driven inflation uncertainty; BoE’s Mann leans cautious on labor market resilience.
The Pound Sterling relinquished a portion of its earlier gains on Wednesday, after reaching a weekly high of 1.3359. The currency pair edged down approximately 0.03% in a session characterized by a lack of significant market catalysts, as traders positioned themselves ahead of the forthcoming release of Gross Domestic Product (GDP) figures for the United Kingdom. As of the latest observation, the GBP/USD exchange rate is trading at 1.3293. Market participants are keenly awaiting the GDP data to gauge the strength of the UK economy and its potential impact on future monetary policy decisions by the Bank of England.
GBP/USD eases to 1.3293 after peaking at 1.3359, with BoE and Fed policy outlooks in focus ahead of key data releases
The Greenback has partially retraced its gains from the beginning of the week, as reflected by the US Dollar Index (DXY). The DXY, a measure of the US Dollar’s value relative to a basket of six major currencies, experienced a notable increase following reports of a de-escalation in trade tensions between China and the United States. This initial rally was driven by hopes of improved global trade conditions. However, with market participants having largely anticipated this development, the DXY subsequently declined by 0.15%, settling at 100.77. This suggests that the initial positive reaction to the tariff truce may have been somewhat overblown, or that other factors are now weighing on the dollar’s performance.
The absence of major economic data releases from both sides of the Atlantic has kept investors focused on previously released figures and forward-looking expectations. While recent US inflation data indicated a modest dip, market participants continue to anticipate approximately 52 basis points of monetary policy easing by the Federal Reserve in 2025, according to pricing in the swaps markets. This expectation reflects a belief that the Fed will need to lower interest rates in the coming year to support economic growth, even with inflation remaining a concern. The market’s current pricing suggests a degree of confidence that the Fed will be able to navigate the challenges of balancing inflation and growth in the medium term. Traders are also closely monitoring comments from Federal Reserve officials for any hints about the future path of monetary policy.
