The GBP/USD pair slightly pulled back after reaching a two-month high of 1.2674 on Friday, trading around 1.2670 during the Asian session. Despite this minor dip, the pair gained ground over the week as the US Dollar (USD) struggled, pressured by weak jobless claims data and mixed signals from the Federal Reserve (Fed).
US Initial Jobless Claims for the week ending February 14 rose to 219,000, exceeding the expected 215,000. Continuing Jobless Claims also saw a slight increase to 1.869 million, just under the forecast of 1.87 million. This weaker-than-expected data contributed to the softness in the USD.
The GBP/USD pair also benefitted from improved market sentiment following US President Donald Trump’s announcement of potential progress in trade negotiations with China, which eased market concerns about tariffs.
Meanwhile, there was some caution in the markets regarding the Federal Reserve’s stance on inflation. Fed Governor Adriana Kugler noted that US inflation still has “some way to go” before reaching the 2% target, indicating some uncertainty about future policy. Fed President St. Louis Fed Alberto Musalem flagged risks of stagflation and rising inflation expectations. However, Atlanta Fed President Raphael Bostic left open the possibility of two rate cuts this year, depending on economic conditions.
In the UK, traders remain cautious about the economic outlook, with Bank of England (BoE) Governor Andrew Bailey warning of sluggish economic growth and a softening labor market. However, the Pound saw a brief boost after the release of a hotter-than-expected UK Consumer Price Index (CPI) report for January, despite Bailey’s earlier comments that short-term inflation spikes driven by volatile energy prices wouldn’t be persistent.
Overall, while the USD faces pressure, uncertainty about both US and UK economic conditions continues to weigh on the GBP/USD outlook.
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