POUND STERLING FACES PRESSURE AS FOCUS SHIFTS TO CENTRAL BANK DECISIONS

• Pound Sterling remains subdued on dismal market mood ahead of US core PCE price index data.
• High UK inflation would allow BoE policymakers to maintain a hawkish tone on interest rates.
• The US Dollar aims to advance further on robust US GDP growth.

The Pound Sterling (GBP) falls on the backfoot as investors turn cautious ahead of the interest rate decisions by the Bank of England (BoE) and the Federal Reserve (Fed) next week. Both central banks are widely anticipated to keep the monetary policy unchanged for the fourth straight time but guidance on interest rates for the entirety of 2024 will be keenly watched.

BoE policymakers are expected to refrain from rate-cut discussions as the United Kingdom economy is still experiencing significantly higher inflationary pressures than the US. There, however, policymakers could provide some cues about future interest rate-cuts. The Summary of Economic Projections (SEP) published after the last Fed meeting showed members on average predicting three rate cuts in 2024.

Before the Fed's interest rate decision, market participants will focus on the core Personal Consumption Expenditure (PCE) price index data for December, which will be published at 13:30 GMT. Fed policymakers could emphasize on rate-cuts after the first-half of 2024 if the underlying inflation data remains stubbornly high