GBP/USD slips to near 1.3150 ahead of US PCE data

• GBP/USD slips as traders take caution ahead of US Personal Consumption Expenditure price index data.
• US Gross Domestic Product rose 3.0% in Q2, beating both the expected and previous growth rate of 2.8%.
• Sterling could gain ground as traders expect the BoE to keep rates higher for longer.

GBP/USD is losing ground for the third session in a row, trading around 1.3160 ​​during Asian hours on Friday. This downside could be attributed to the improvement in the US dollar (USD) following stronger-than-expected economic data released on Thursday. Investors await July’s personal consumption expenditures (PCE) price index, scheduled for release later in the North American session.

Annualized U.S. Gross Domestic Product rose 3.0% in the second quarter, beating both the expected and previous growth rate of 2.8%. In addition, initial jobless claims showed that the number of people filing for unemployment benefits fell to 231,000 in the week ended Aug. 23, down from 233,000 previously and slightly below the 232,000 expected.

However, dovish remarks from the Federal Reserve could constrain further gains for the greenback. Atlanta Federal Reserve President Raphael Bostic, a prominent FOMC hawk, signaled on Thursday that it may be “time to move” on rate cuts because of further declines in inflation and a higher-than-expected unemployment rate. However, Bostic wants to wait for confirmation from the next monthly jobs report and two inflation reports before the Fed’s September meeting.

The downside for the British pound (GBP) may be limited as traders anticipate that the Bank of England (BoE) will keep interest rates higher for longer compared to the US Federal Reserve (Fed). The BoE cut rates by 25 basis points to 5% on August 1, and money markets are pricing in a further 40 basis points of cuts by the end of the year.

In his speech at the Jackson Hole Symposium last week, BoE Governor Andrew Bailey indicated that the second-round effects of inflationary pressures will be less significant than anticipated. However, Bailey also advised against rushing further interest rate cuts, according to Reuters.