GBP/USD trades with modest gains below the mid-1.2600s ahead of UK, US PMI data

• GBP/USD edges higher to 1.2638 amid the modest decline of the USD. 
• Fed officials noted that they wanted to see more evidence before starting to cut rates. 
• BoE’s Bailey said that inflation in the UK has fallen and that the technical recession last year is expected to have little effect.
• Investors will closely watch the UK and US PMI data for February, due later on Thursday.

The GBP/USD pair trades stronger below the mid-1.2600s during the early Asian section on Thursday. Investors will turn their attention to the UK and UK S&P Global Purchasing Managers Index (PMI) for February. The major pair currently trades around 1.2638, gaining 0.04% on the day. 

The minutes of the January meeting of the FOMC showed most participants emphasized the risks of moving too quickly to ease the stance of monetary policy, while some participants noted the risk that progress toward price stability could stall. The FOMC policymaker highlighted the importance of carefully assessing incoming data in judging whether inflation is moving down sustainably to the 2% target.

The Bank of England (BoE) policymaker Swati Dhingra said on Wednesday that delaying interest rate cuts comes at a cost for living standards and could trigger a hard landing for the UK economy. Dhingra further stated that inflation in the UK is already on a firm downward path as she reaffirmed her case for easing monetary policy. 

BoE governor Andrew Bailey said that inflation had “come down very rapidly” in the UK, and the technical recession the UK economy entered last year is likely to have a low impact. He added that the central bank doesn’t need obvious inflation to come back to target before cutting interest rates. The optimistic comments from BoE’s Bailey provide some support to the Pound Sterling (GBP) and act as a tailwind for GBP/USD. 

Moving on, traders will monitor the UK S&P Global/CIPS PMI and the US S&P Global PMI for February. Also, the weekly Initial Jobless Claims, Existing Home Sales, and the Chicago Fed National Activity Index are due on Thursday. The FOMC’s Cook, Kashkari, Jefferson, and Harker are set to speak.