GBP/USD extends its downside above the 1.2600 mark, US PMI data eyed

• GBP/USD remains on the defensive around 1.2625 amid the firmer USD.
• The US Core PCE rose by 2.8% YoY in January versus 2.9% prior, in line with the market consensus.
• Investors will monitor the UK Nationwide Housing Prices and the final S&P Global Manufacturing PMI on Friday.

The GBP/USD pair extends its downside below the mid-1.2600s during the early Asian session on Friday. The renewed US Dollar (USD) demand above the 104.00 psychological mark drags the major pair lower. Investors will shift their focus to the final US S&P Global Manufacturing PMI for February. At press time, GBP/USD is trading at 1.2625, adding 0.01% on the day.

Data released from the US Bureau of Economic Analysis (BEA) on Thursday reported that the Personal Consumption Expenditure (PCE) Price Index eased from 2.6% to 2.4% YoY, in line with the market expectation. Additionally, the Core PCE, the Federal Reserve's (Fed) preferred inflation gauge, rose by 2.8% YoY in January compared to the December’s reading of. 2.9, matching with the consensus.

Atlanta Fed President Raphael Bostic said that the recent inflation data indicates the road back to the central bank’s 2% inflation target will be “bumpy.” Meanwhile, Chicago Fed President Austan Goolsbee, stated that he expects the first rate cuts later this year, but he cannot specify the timeline.

The market anticipate the Fed to begin cutting the interest rate by summer. Nonetheless, the timing of the easing policy is uncertain as inflation could be more stubborn than expected and it could convince the Fed to stay high on rate. This, in turn, might lift the Greenback and weighs on the GBP/USD pair.

On the other hand, the speculation that the Bank of England (BoE) will pivot to rate cuts later than the Fed might provide some support to the Pound Sterling (GBP). The BoE Deputy Governor Dave Ramsden said he wants to see how long inflation will remain elevated before considering a shift in monetary policy stance.

Looking ahead, the UK Nationwide Housing Prices is due on Friday. On the US docket, the final S&P Global Manufacturing PMI and the final Michigan Consumer Sentiment will be released. Furthermore, the Fed’s Williams, Logan, Waller, Bostic, Daly, and Kluger are set to speak.