British Pound Holds Gains Above 1.3150 as Market Awaits US PCE Inflation Data

The British pound is maintaining its recent gains against the US dollar, trading comfortably above the 1.3150 mark during the Asian and early European sessions on Friday. The currency pair’s stability comes as traders adopt a cautious stance ahead of the release of the US Personal Consumption Expenditures (PCE) price index, the Federal Reserve’s preferred inflation gauge.

Pound Supported by Strong UK Economic Data

The pound’s resilience follows a series of better-than-expected economic indicators from the United Kingdom. Recent data showed UK GDP growth exceeding forecasts, while services inflation remained stickier than anticipated. These figures have reinforced the Bank of England’s cautious approach to monetary easing, with markets now pricing in a slower pace of rate cuts compared to earlier projections. The relative strength of the UK economy, combined with the BoE’s hawkish tilt, has provided a solid floor for sterling in recent weeks.

All Eyes on US PCE Inflation Data

The primary focus for currency markets today is the release of the US core PCE price index for April, scheduled for 12:30 GMT. Economists expect the core PCE to show a monthly increase of 0.3%, with the annual rate holding steady at 2.8%. A higher-than-expected reading could reignite fears that the Federal Reserve will need to keep interest rates elevated for longer, potentially boosting the dollar. Conversely, a softer print would strengthen the case for rate cuts later this year, providing further support for the pound and other risk-sensitive currencies.

Federal Reserve officials have recently reiterated their data-dependent stance, emphasizing that they need to see sustained progress on inflation before considering policy loosening. The PCE data will be a critical input for the Fed’s next policy decision in June.

Technical Levels to Watch

From a technical perspective, GBP/USD is trading near its highest levels since early 2024. The 1.3150 level is acting as immediate support, with the next key support zone around 1.3100. On the upside, resistance is seen near 1.3200, followed by the psychological 1.3250 mark. A decisive break above 1.3200 could open the door for further gains toward 1.3300. The 14-day Relative Strength Index (RSI) is hovering near 60, indicating room for further upside without being overbought.

Conclusion

The British pound’s ability to hold above 1.3150 reflects a combination of robust UK economic data, a cautious Bank of England, and a broadly weaker US dollar ahead of key inflation data. The PCE release today will be the next major catalyst for the pair. A soft inflation print could propel GBP/USD toward the 1.3200 resistance, while a hot reading may trigger a pullback toward 1.3100. Traders should brace for increased volatility around the release.

FAQs

Q1: What is the PCE price index and why does it matter for GBP/USD?
The PCE price index is the Federal Reserve’s preferred measure of inflation. It influences the Fed’s interest rate decisions. A higher PCE reading suggests the Fed may keep rates high, strengthening the US dollar. A lower reading supports rate cut expectations, weakening the dollar and boosting GBP/USD.

Q2: What is the Bank of England’s current stance on interest rates?
The Bank of England has maintained a cautious approach, keeping interest rates at 5.25%. Recent sticky inflation and strong GDP data have reduced expectations for near-term rate cuts, which has supported the British pound.

Q3: What are the key support and resistance levels for GBP/USD?
Key support levels are at 1.3150 and 1.3100. Key resistance levels are at 1.3200 and 1.3250. A break above 1.3200 could lead to further gains toward 1.3300.