GBP/USD weakens below 1.2800 as Fed pencils just one rate cut this year

• GBP/USD loses traction around 1.2760 in Friday’s early Asian session amid the stronger US Dollar. 
• The Fed's revised projections have boosted the US dollar broadly despite the weaker US May PPI data. 
• Traders increased their bets on the BoE’s rate cut as the UK economy stagnated in April. 

The GBP/USD pair edges lower near 1.2760 after three consecutive sessions of gain during the early Asian session on Friday. The recovery of the USD Index (DXY) above the 105.00 barrier weighs on the major pair. Later on Friday, the preliminary US Michigan Consumer Sentiment report is due, followed by a speech by Federal Reserve (Fed) Bank of Chicago President Austan Goolsbee. 

The US Fed signaled that it will cut its key interest rate just once by 25 basis points (bps) toward the end of 2024 despite inflation easing, according to the dot plot. The Fed's revised projections have lifted the Greenback across the board and created a headwind for GBP/USD despite the weaker-than-expected US economic data released on Thursday. 

The US Producer Price Index (PPI) rose 2.2% YoY in May, compared to the 2.3% increase in April (revised from 2.2%), below the market expectation of 2.5%, according to the US Bureau of Labor Statistics on Thursday. The core PPI figure climbed 2.3% YoY in May, below the estimation and previous reading of 2.4%. On a monthly basis, the PPI declined 0.2% in May, while the core PPI remained unchanged at 0%.

Additionally, the weekly Initial Jobless Claims for the week ending June 6 increased by 242K from the previous week's reading of 229K. This figure came in above the market consensus of 225K. 

The growing speculation that the Bank of England (BoE) to start cutting interest rates in the August or September meeting exerts some selling pressure on the Pound Sterling (GBP). Traders raised their bets on the BoE’s rate cut due to the stagnant UK monthly Gross Domestic Product (GDP) number for April.  "While we are seeing some tentative signs of cooling in the labour market, service sector inflation remains persistently high, and it is likely the MPC would want to wait until the next set of forecasts and a few more data points before it embarks on its first rate cut," said KPMG chief UK economist, Yael Selfin.