• The Pound Sterling faces pressure near 1.3400 against the US Dollar ahead of the US PCE inflation data for August.
• Market expectations for the Fed cutting rates by 50 basis points in November have slightly declined.
• The BoE is expected to cut interest rates once in the last quarter of the year.

The Pound Sterling (GBP) continues to face selling pressure near the round-level resistance of 1.3400 against the US Dollar (USD) in Friday’s London session. The rally for the GBP/USD pair appears to have stalled, as investors focus on the United States (US) Personal Consumption Expenditure Price Index (PCE) data for August, which will be published at 12:30 GMT.

The US core PCE index, the Federal Reserve’s (Fed) preferred inflation gauge, is estimated to have grown 2.7% on year, faster than the 2.6% increase seen in July, while on month prices are expected to have grown steadily by 0.2%. 

The data is likely to influence market speculation for the Fed interest rate cuts in November. Markets are almost equally split about the US central bank lowering rates again by 50 basis points or by a smaller 25 basis points.

According to the CME FedWatch tool, the probability of the Fed reducing interest rates by 50 basis points in November has dropped to 51% from 57% on Thursday. If the PCE data gave signs of a further slowdown in inflationary pressures, market expectations of a big cut interest rate cut would increase. On the contrary, hot inflation figures would weaken the chances of this scenario.