GBP/USD Gears Up for Volatile Week: Focus on UK Data and Fed Meeting

GBP/USD Under Pressure as US Dollar Dominates Sentiment: GBP/USD struggles to recover above $1.2720 in Monday’s early European session, starting off the week in negative territory. The stronger US Dollar is applying downward pressure on the major pair.

US Nonfarm Payrolls Impact: Following the stronger-than-expected May payrolls report, the probability of a Fed policy rate cut in September has fallen from 80% to 50%, pushing expectations towards a December cut. The data, showing 272,000 new jobs and accelerating wage growth, triggered a significant rally in the US Dollar, reflecting the market’s anticipation of prolonged higher interest rates.

Bank of England’s Policy Outlook: The Bank of England (BoE) is expected to keep its interest rate at 5.25% during its June 20th meeting. This decision comes despite slightly lower but still high inflation levels. The upcoming general election in early July adds to the economic unpredictability, impacting market sentiment.

Upcoming UK Economic Data: The Office for National Statistics (ONS) is set to release several important reports this week, including jobs data, monthly GDP figures, industrial production, construction output, and trade balance data.

Upcoming UK Employment Data: Investors will focus on the UK Employment data due on Tuesday, which includes Claimant Count Change, Employment Change, and Average Earnings data. Any signs of weakening labour data or rising unemployment in the UK could lead to expectations of early rate cuts by the Bank of England, potentially adding further weakness to the Pound Sterling.

Upcoming US CPI and Fed Meeting: The US CPI figures for May are due on Wednesday, just before the Fed concludes its two-day policy meeting. Market participants will closely watch the CPI data and the Fed’s updated economic projections and dot plot, both of which are crucial for future USD movement.

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