• The Pound Sterling faces selling pressure against the US Dollar as uncertainty ahead of Fed Powell’s dampens market sentiment.
• UK’s annual shop price inflation decelerated to its lowest since October 2021.
• The BoE may start cutting interest rates in August.

The Pound Sterling (GBP) retraces to 1.2620 against the US Dollar (USD) in Tuesday’s London session. The GBP/USD pair weakens as market participants turn risk-averse amid uncertainty ahead of Federal Reserve (Fed) Chair Jerome Powell’s speech at 13:30 GMT and the United States (US) Nonfarm Payrolls (NFP) data for June, scheduled on Friday. 

Powell is expected to provide cues about when the central bank will begin lowering its key borrowing rates. In June’s policy meeting, Powell said that the softening of inflationary pressures in May is encouraging, but policymakers want to see inflation decline for months before considering interest rate cuts. Officials projected only one rate cut this year as they lack evidence that inflation is on course to return to the desired rate of 2%.

This week, investors will pay close attention to the labor demand and the wage growth data, which will indicate whether the Fed should start reducing interest rates from the September meeting, as indicated by 30-day Federal Fund futures pricing data from the CME FedWatch tool.

In Tuesday’s session, investors will also focus on the US JOLTS Job Openings data for May, which will be published at 14:00 GMT. Economists expect the number of fresh job vacancies to be 7.90 million, slightly lower from 8.06 million in April.