• The Pound Sterling faces selling pressure as the soft inflation outlook prompts BoE rate cut prospects.
• Weak UK Retail Sales also contribute to a softer inflation outlook.
• Fed’s higher for longer interest-rates argument strengthens the US Dollar.

The Pound Sterling (GBP) remains on the back foot in Monday’s London session as investors continue to price in the Bank of England (BoE) will pivot to interest-rate cuts earlier than the US Federal Reserve (Fed). The GBP/USD pair trades close to a five-month low around 1.2360 as investors expect that the Fed will keep its monetary policy framework restrictive for longer. A strong economic outlook and robust consumer spending in the United States are keeping inflation higher.

The US Dollar Index (DXY), which tracks the US Dollar’s value against six major currencies, trades broadly steady near the crucial support of 106.00. This week, the US Dollar will be guided by the core Personal Consumption Expenditure Price Index (PCE) data for March, which is expected to influence Fed rate cut expectations. Currently, financial markets are anticipating that the Fed will begin to reduce borrowing rates from September.

Meanwhile, easing fears of further escalation in tensions between Israel and Iran could offer some support to risk-sensitive assets. Iran said they have no plans for an immediate retaliation, according to Al Jazeera.