Pound Sterling makes a robust recovery amid an improved market sentiment fueled by softer US Core Personal Consumption Expenditure (PCE) Price Index data for December. The monthly core PCE grew by 0.2%, meeting expectations, while the annual core PCE figure decelerated to 2.9%, falling short of the anticipated 3% and the previous reading of 3.2%.

Looking ahead, investor attention will be on the upcoming interest rate decisions from both the Bank of England (BoE) and the Federal Reserve (Fed). While both central banks are widely expected to maintain their current monetary policies for the fourth consecutive time, guidance on interest rates for the entirety of 2024 will be closely monitored.

BoE policymakers are likely to refrain from discussions about rate cuts, given the significantly higher inflationary pressures in the United Kingdom compared to the US. On the other hand, there might be hints of potential interest rate cuts from the Fed. The Summary of Economic Projections (SEP) released after the last Fed meeting indicated an average prediction of three rate cuts in 2024. Prior to the Fed’s interest rate decision, the anticipation of softer core PCE data is expected to increase the likelihood of a rate cut in March.