• Pound Sterling exhibits strength against US Dollar ahead of US NFP data.
• BoE policymakers want inflation to come down sustainably to 2% before a shift to policy normalization.
• Fed Powell expects the central bank is closer to gain confidence that inflation will decline to the desired target.

he Pound Sterling (GBP) turns sideways in Friday’s European session as investors remain sidelined ahead of the United States Nonfarm Payrolls (NFP) data for February, which will be published at 13:30 GMT. The broader appeal of the GBP/USD pair is upbeat as markets broadly expect the Federal Reserve (Fed) to cut interest rates before the Bank of England (BoE) does so, which might reduce the policy divergence between them for some time.

While market expectations for a Fed rate cut are for the June meeting, investors see the BoE reducing interest rates from August. Inflation in the UK is still higher than in other developed countries in the Group of Seven (G-7) nations due to sticky services inflation, which is driven by robust wage growth.

Next week, the UK’s Average Earnings data for the three months ending in January will provide fresh guidance on the inflation outlook. Strong wage growth momentum would further dampen rate-cut expectations. BoE policymakers warned that wage growth remains almost double what is required to be consistent for inflation to return to the 2% target.