.jpg)
The GBP/USD has been lower on Tuesday, trading at 1.2165 and down by 0.14%. Despite the decrease, the currency pair hovers around a one-month high due to a soft US dollar that has been affected by the recent market turmoil in the banking sector.
UK Pay Growth and Bank of England's Inflation Concerns
UK pay growth has slowed in the three months leading up to January, which could influence the Bank of England's decisions in its upcoming rate-setting meeting. The bank aims to control inflation, and the recent pay growth data could have an impact on its strategy moving forward.
UK Chancellor's Upcoming Budget Announcement
Chancellor Hunt's budget announcement tomorrow is expected to focus on supporting productivity and investment without adding strain on public finances. If the measures announced align with these goals, the GBP is likely to react positively. The recent break above the 50-day simple moving average at 1.2135 signals bullish near-term behaviour for the currency pair.
US Inflation Data and Federal Reserve's Response
US inflation data shows that the Consumer Price Index (CPI) rose by 0.4% last month, with an annualized gain of 6.0% in the 12 months through February. Although this is a slower pace than January's 6.4% annualized gain, it still exceeds the Federal Reserve's 2% target. This has led to an increase in demand for the US dollar and futures pricing in a Fed rate cut by year's end.
CME's Fed Watch Tool Predicts Policy Decisions
The CME's Fed Watch Tool indicates a 28.4% likelihood that the Federal Reserve will maintain its current stance at the end of its two-day policy meeting on March 22. This is a slight decrease from the previous day's expectations following the release of the CPI data.
In summary, the GBP/USD experienced a slight decline on Tuesday, primarily due to the soft US dollar reacting to market turmoil in the banking sector and recent inflation data. The upcoming UK budget announcement and the Federal Reserve's response to inflation will be key factors influencing currency movements in the near future.
.jpg&description=GBP/USD Declines Slightly as Soft US Dollar Reacts to Market Turmoil and Inflation Data){kind=link}