Pound Weakens as Core PCE Inflation Surpasses Expectations
The British pound weakened against the US dollar on Friday after the latest core Personal Consumption Expenditures (PCE) price index came in above market expectations.
The PCE price index rose by 0.4% month-over-month, exceeding the 0.3% forecast, while the annual rate held at 2.8%, unchanged from the previous month but above the 2.7% that economists had predicted.
This hotter-than-expected inflation print prompted traders to trim bets on a Fed rate cut in the coming months, supporting the US dollar across the board and putting downward pressure on GBP/USD.
The divergence in monetary policy expectations between the Fed and the BoE is a key driver of the exchange rate. Analysts note that if inflation remains sticky, the Fed could delay cuts further, which would likely keep the dollar firm against the pound and other major currencies.