GBP/USD finds interest around 1.2000, downside seems favored ahead of US PCE Inflation
- GBP/USD observe bids around 1.2000, however, the downside looks imminent amid geopolitical tensions.
- The USD Index could be fueled for more gains if US PCE inflation delivers signs of recovery.
- BoE Mann has favored further policy tightening as she is worried about the extended persistence of inflation
The GBP/USD pair has sensed a buying interest around 1.2000 in the early Asian session. The Cable has shown a minor recovery despite the weak risk appetite of the market participants. The rebound move by the Pound Sterling should be considered a pullback move for now as the downside bias is still intact amid geopolitical tensions.
S&P500 futures have eased some gains as US President Joe Biden looks confident about an arms deal between China and Russia to support Moscow in its battle against Ukraine. The Biden administration is considering releasing intelligence it believes shows that China is weighing whether to supply weapons to support Russia’s war in Ukraine, as reported by Wall Street Journal. Earlier, US Secretary of State Antony Blinken warned, in an interview with CBS News, “China is seriously exploring supplying arms to Russia.”
Global equities could face severe pressure ahead as the central banks are not done with their policy tightening to contain the sticky inflation. Feb 10-22 Reuters poll of more than 150 strategists, analysts, and fund managers covering 17 global stock indices found 56% were expecting a correction in their local market in the next three months. Therefore, investors should brace for sheer volatility ahead.
The US Dollar Index (DXY) has surrendered some of its gains and has dropped to near 104.20. The USD Index is likely to remain volatile ahead of the release of the United States Core Personal Consumption Expenditure (PCE) Price Index data. On an annual basis, the economic data is seen higher at 4.3% vs. the former release of 4.4%. The monthly data is expected to escalate by 0.4% against 0.3% released earlier. And, January Personal Spending is expected to increase by 1.3% against a contraction of 0.2%.
On the United Kingdom front, the commentary from Bank of England (BoE) policymaker Catherine Mann indicates that the central bank should not consider the rate peak for now as the inflation figure is still in double digits despite pushing rates to 4%. BoE policymaker is worried about the extended persistence of inflation and sees the need for more tightening and believes that a pivot is not imminent.