- The Pound Sterling drops to the round-level support of 1.2700 as dismal market sentiment has dampened the appeal of risk-sensitive assets. The risk appetite of investors has diminished ahead of a slew of central bank meetings this week. "Investors are uncertain that the Fed will start cutting rates in June, as markets previously widely expected, due to recently hot inflation data. This has weakened the appeal for risk assets.
- The demand for safe-haven assets has improved significantly. The US Dollar Index (DXY), which measures the US Dollar’s value against six rival currencies, continues its winning streak for the fourth trading session on Tuesday. The USD Index jumped to 103.80 on hopes that the Fed will maintain hawkish rhetoric after keeping interest rates unchanged in the range of 5.25%-5.50% on Wednesday
- This week, the Pound Sterling will be guided by the Bank of England’s interest rate decision, which will be announced on Thursday. The BoE is widely anticipated to keep interest rates unchanged at 5.25%. Therefore, investors will keenly focus on cues about when the BoE is expecting to start reducing interest rates. Currently, the market expects the BoE to begin reducing interest rates in its August policy meeting.
- The market expectations for a rate cut in August are expected to be influenced by the United Kingdom CPI data for February, which will be announced on Wednesday. The annual headline inflation is forecast to have fallen to 3.6% against 4.0% in January. In the same period, core inflation – which excludes volatile food and energy prices – is forecast to have decelerated to 4.6% from 5.1%. For the monthly headline CPI, economists have forecasted a sharp growth of 0.7% after declining by by 0.6% in January.
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