UK in no hurry to cut interest rates | 12 April 2024

Events to watch out for today:

09:00 EET. GBP - Change in GDP volume

17:00 EET. USD - Consumer Sentiment Index from the University of Michigan

21:30 EET. USD - FOMC member Rafael Bostic will give a speech

22:30 EET. USD - FOMC member Mary Daly will give a speech

GBPUSD:

GBPUSD is near 1.2560 during the early Asian session on Friday. The market expects the Bank of England (BoE) to cut interest rates sooner than the US Federal Reserve (Fed), which is weighing on the Pound Sterling (GBP) and the major pair. Today, investors will be watching the UK's monthly Gross Domestic Product (GDP) for February.

"Hawkish" comments from Bank of England Governor Megan Green did not help the British Pound. Green said that interest rate cuts in the UK should remain "on the sidelines" due to persistent inflationary pressures, which are still a bigger threat than in the US. Green added that markets were wrong to expect the Bank of England to cut rates earlier than the Fed this year. U.K. GDP data for February may provide some hints about the health of the British economy. If the report shows stronger than expected data, it could provide some support for the British Pound and limit the GBP/USD decline.

This week's stronger than expected CPI inflation figures have sparked speculation that the Fed will have to reschedule the number and timing of interest rate cuts this year. Fed officials believe the U.S. central bank has reached the peak of the current rate tightening cycle and monetary policy is well positioned to respond to the economic outlook, including the possibility of keeping rates higher if inflation gradually declines. The Fed's hawkish remarks are helping to boost the dollar and push GBP/USD lower.

Thursday saw the release of US Producer Price Index (PPI) data for March, which rose 2.1% y/y, falling short of the 2.2% forecast. The core PPI, which excludes volatile food and energy prices, rose by 2.4% y/y, compared to the market consensus of 2.3%.

Trading recommendation: Trade mainly with buy orders at the price level of 1.2570. We consider sell orders at the price level of 1.2535.

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