The GBP/USD pair has experienced a recovery after hitting a fresh low lasting six weeks at 1.2332 during the early European session. Following a tentative pullback, investors are anticipating the Cable to resume its downward trajectory as concerns over the pending US debt-ceiling increase contribute to risk-aversion sentiment.
Early gains in S&P500 futures have been reduced during the Asian session, as cautious investors speculate that the US economy may face difficulties in meeting its payment obligations if the borrowing cap is not raised before June 01.
The US Dollar Index (DXY) is poised to extend its upward momentum, having recently reached a two-week high at 104.06.
Market participants appear primarily focused on the US debt-ceiling issues rather than the dovish cues on interest rate guidance provided by the Federal Open Market Committee (FOMC) minutes. Uncertainty surrounding US banking stability has cast doubt on the likelihood of interest rate hikes during June’s monetary policy meeting.
Meanwhile, Raphael Bostic, the President of the Atlanta Federal Reserve (Fed), has recommended that the central bank maintain a data-driven approach during June’s monetary policy meeting. He also expressed that a scenario without considering interest rate cuts until 2024 would be preferable.
Regarding the Pound Sterling, inflationary pressures in the United Kingdom exhibited mixed trends on Wednesday. While the headline Consumer Price Index (CPI) softened slightly, it remained comfortably above market consensus, while core inflation continued to rise.
This situation may necessitate the Bank of England (BoE) announcing further interest rate adjustments.
However, UK FM Jeremy Hunt expressed confidence in halving inflation by the year-end. He suggested that tax cuts would be implemented only in an environment supportive of inflation.
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