- GBP/USD has attracted some bids around 1.2106 as the DXY has surrendered 105.00.
- The pound bulls are weakened as the UK economy is facing a very large real income shock.
- UK’s GDP numbers are seen stable while the annual US core PCE Price Index may slip to 4.7%.
The GBP/USD pair has attempted a rebound after sensing less selling pressure while testing Wednesday’s low at 1.2106. To make the rebound a little more trustworthy, the pound bulls need to drive the cable above the intraday high at 1.2140.
On Wednesday, the pound bulls were hammered strongly by the market participants after Bank of England (BOE) Governor Andrew Bailey uncovered inflation risks. BOE Bailey commented that the UK economy is facing a very large real income shock. Well, a country that is operating at a 9.1% inflation rate must be facing harsh consequences of accelerating price pressures.
A higher inflation rate in the UK economy has diminished the value of ‘paychecks’ received by the households. Individuals are spending significantly higher on fossil fuels and food products despite the quantity remaining constant or lower. This has reduced their real income and henceforth, the overall demand. No doubt, the BOE will resort to more rate hike announcements going forward. Going forward, the focus will remain on Gross Domestic Product (GDP) numbers, which are seen as stable at 0.8% and 8.7% for the first quarter on a quarterly and yearly basis.
Meanwhile, the US dollar index (DXY) is expected to extend losses intraday as the asset has surrendered the psychological support of 105.00. In today’s session, investors' focus will remain on the core US Personal Consumption Expenditure (PCE) Price Index. The annual figure may decline to 4.7% from the prior print of 4.9%. However, the monthly figure is seen higher to 0.4% vs. 0.3% reported earlier.
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