The GBP/USD pair faces a pivotal session this Friday, with its near-term trajectory hinging almost entirely on the upcoming US Core PCE Price Index data. As the Federal Reserve’s favored inflation metric, this release is poised to dictate the Dollar’s strength, potentially extending the Pound’s recent losses.
Friday’s Key Event: All Eyes on US Inflation
The primary catalyst for the GBP/USD pair today will be the US Core PCE report. Forecasts suggest the figure will hold steady at an annual rate of 2.9%. A confirmation or an upside surprise would likely reinforce the Federal Reserve’s hawkish stance, pushing back expectations for interest rate cuts and bolstering the US Dollar. As reported by Reuters, recent commentary from Fed officials has emphasized a data-dependent approach, meaning stubborn inflation figures will keep monetary policy restrictive. For the Pound, this could signal a challenging end to the week.
In contrast, the UK economic calendar is silent, offering no domestic data to counter external pressures. This lack of homegrown catalysts leaves Sterling vulnerable, causing it to take directional cues from global risk sentiment and, most significantly, the flow of US economic indicators.
Recap: US Economic Resilience Hammers the Pound
The Pound’s decline on Thursday was a direct response to a series of surprisingly strong US economic data releases, which collectively painted a picture of an economy defying slowdown fears.
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Durable Goods Orders: Orders for long-lasting manufactured goods dramatically reversed course, surging to 2.9% in August after a previous reading of -2.8%. This significantly outperformed the market consensus of a -0.5% contraction.
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GDP Revision: The final estimate for second-quarter Gross Domestic Product was revised sharply higher to 3.8%, up from -0.5% and beating expectations of 3.3%. This indicates the US economy was growing at a much hotter pace than initially believed. Detailed analysis from Bloomberg highlights how strong consumer spending has been a key driver of this exceptional growth.
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Jobless Claims: Further evidence of labor market tightness emerged as initial jobless claims fell to 218,000, down from the previous week’s 232,000.
This trifecta of positive data fueled a broad-based US Dollar rally, as investors scaled back bets on imminent Fed easing.
On the other side of the Atlantic, the Pound failed to find any meaningful support. A disappointing CBI Distributive Trades Survey for September, which improved only marginally to -29 from -32 while missing the forecast of -26, underscored ongoing challenges in the UK retail sector. This left Sterling on the defensive throughout the trading day, setting the stage for a potentially volatile reaction to the upcoming US inflation data.
