Fundamental Overview

Last week, Bank of England Governor Andrew Baily said that inflation is edging lower and might warrant a rate cut. On Friday, BoE Deputy Governor Dave Ramsden shifted slightly dovish, saying that he expects incoming data to accentuate the economy's slowdown.

The swaps markets suggest the Bank of England might cut rates in August, with odds standing at 95.9%.

Across the pond, manufacturing activity in the United States (US) gathers steam, as revealed by the Chicago Federal Reserve. The Chicago Fed National Activity Index (CFNAI) rose to 0.15 in March from 0.09 in February. The index’s three-month moving average increased from -0.28 in February to -0.19 in March.

That, along with the hawkish tilt adopted by Federal Reserve Chair Jerome Powell, increased the odds of a less dovish Fed. Market participants expect fewer rate cuts than the Fed's March Summary of Economic Projections (SEP) projection.

Chicago Board of Trader (CBOT) data depicts the Fed could begin to ease policy until September 2024, a month after the BoE. That would keep the GBP/USD downward pressured, as the interest rate differential favors the Fed.