Pound Sterling struggles to extend recovery above the round-level resistance of 1.2700 as market participants seek fresh guidance on interest rates.
Investors remain uncertain about the timing for rate cuts by the Bank of England as policymakers need more evidence to confirm that inflation will come down sustainably to the 2% target.
BoE policymakers see momentum in wage growth is currently twice that required to tame sticky price pressures, allowing them to remain leaned towards holding interest rates elevated.
Meanwhile, speculators have trimmed their bullish positions in the Pound Sterling for the first time in eight weeks, suggesting that they may be searching for a new catalyst to give the currency a fresh pep, Reuters reported.
While the BoE is widely anticipated to begin reducing interest rates after the Federal Reserve, prospects for the economic outlook of the United Kingdom economy will influence the timing for rate cuts.
The Services PMI for the last two months has indicated that the technical recession in the second half of 2023 was shallow.
Robust order book and higher business optimism indicate that the economy aims for a sharp recovery.
UK business optimism has improved amid imminent hopes of the BoE pivoting to rate cuts and easing the cost of living crisis.
On the consumer spending front, the Confederation of British Industry (CBI) reports that the momentum at which Retail Sales have been declining slowed sharply in February.
The CBI has reported the monthly retail sales balance, a gauge of sales versus a year ago, rose to -7 from -50 in January, the slowest fall in 10 months, Reuters reported.
This indicates an improvement in consumers’ appetite for spending, which would allow businesses to return to their average operating capacity.
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