POUND STERLING RECOVERS AGAINST US DOLLAR ON UPBEAT MARKET SENTIMENT

• The Pound Sterling rebounds as market mood improves and the US Dollar faces a modest correction.
• BoE Bailey says he doesn’t see market expectations for two or three rate cuts as unreasonable.
• This week, the US Dollar’s moves will be driven by the core PCE price index data. 

The Pound Sterling (GBP) extends its upside to 1.2650 against the US Dollar in Tuesday’s London session as the latter faces profit-taking after refreshing monthly highs. The GBP/USD pair exhibits a sound recovery even though investors expect that the Bank of England (BoE) will be more dovish this year than previously anticipated, driven by lower-than-anticipated inflation data in January and February

Two BoE policymakers, Catherine Mann and Jonathan Haskel – who voted for rate hikes in February – dropped their hawkish calls on interest rates in the March meeting. This has boosted confidence among investors that inflation in the United Kingdom is moving in the right direction. The BoE said last week, in his monetary policy statement, that the central bank is not at a point where interest rates can be reduced. However, policymakers didn’t rule out the market’s view of two or three rate cuts this year. 

This week, the market sentiment will drive the Pound Sterling’s next move as the UK economic calendar is light. Investors will keenly focus on the United States core Personal Consumption Expenditure Price Index (PCE) data for February, which will be published on Good Friday. The annual Core PCE is forecasted to have grown at a steady pace of 2.8%.