The Pound Sterling (GBP) posts a fresh two-and-a-half month high around 1.2750 against the US Dollar (USD) in Tuesday’s North American session. The GBP/USD pair strengthens as the US Dollar extends its downside after United States (US) Treasury Secretary Scott Bessent said that they are set on bringing interest rates down, Reuters reported. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, slides below 106.00.
US Treasury Bessent’s dovish comments have come at a time when traders have raised Federal Reserve (Fed) bets significantly due to a slew of weak US economic data. An expected slowdown in the United States (US) core Personal Consumption Expenditure Price Index (PCE) data for January, a sharp decline in Consumer Confidence for February – the first decline in the Personal Spending data for January in two years – and weak ISM Manufacturing PMI data for February have contributed to market expectations that the Fed could resume the monetary expansion cycle in June.
Traders have raised bets supporting the Fed to resume the policy-easing cycle in the June meeting, which was paused in January. The likelihood for the central bank to reduce interest rates in June has increased to 86.9% from 69% recorded a week ago, according to the CME FedWatch tool.
On tariffs over China. Scott Bessent said China’s business model is to “export, and that is unacceptable.” Bessent said he is confident that Chinese manufacturers will “eat the tariffs”.
Going forward, investors will focus on the US ADP Employment Change, US ISM Services PMI, and the US Nonfarm Payrolls (NFP) data for February. All of them will be released during this week and are likely to influence market expectations for the Fed’s monetary policy outlook.
