GBP/USD remains on the defensive below 1.2550 on upbeat US PMI data
- GBP/USD struggles to gain ground near 1.2545 on the stronger US Dollar.
- The US ISM manufacturing data unexpectedly expanded for the first time in nearly 18 months.
- The dovish stance of the Bank of England (BoE) drags the GBP lower against the USD.
The GBP/USD pair remains on the defensive around 1.2545 during the early Asian session on Tuesday. The US Dollar Index (DXY) rises above the 105.00 mark, and the US Treasury bond yields edges higher sharply overnight following the upbeat US ISM data, which creates a headwind for the GBP/USD pair.
The US ISM Manufacturing PMI data unexpectedly expanded in March, with the index rising to 50.3 from 47.8 in February, stronger than the expectation of 48.4. The reading registered the highest level since September 2022, and it is the first time manufacturing activity has expanded since October 2022. A reading above 50 indicates that the manufacturing economy is generally expanding, while a reading below 50 signals that factory activity is generally declining. In response to the stronger-than-expected data, the US Dollar (USD) attracts some buyers across the board.
The dovish stance of the Bank of England (BoE) in its latest monetary policy statement has exerted some selling pressure on the Pound Sterling (GBP). The BoE Governor Andrew Bailey said that market expectations for two or three rate cuts this year are “reasonable,” while adding that the UK central bank is not seeing a lot of sticky persistence. These comments trigger expectations for the BoE to cut interest rates in June and drag the GBP lower against the Greenback.
Later on Tuesday, the UK Nationwide Housing Prices and S&P Global/CIPS Manufacturing PMI for March are due. Also, Federal Reserve (Fed) officials, including Governor Michelle Bowman, Loretta Mester, John Williams, and Mary Daly, are set to speak on Tuesday.