GBP/USD hangs near one-week low, looks to US macro data for fresh impetus

• GBP/USD drifts lower for the second straight day and drops to over a one-week trough.
• The USD sticks to the hotter US PPI-inspired gains and exerts some pressure on the pair.
• Traders now look to the US macro data for some impetus ahead of the FOMC next week.

The GBP/USD pair continues losing ground for the second straight day – also marking the fourth day of a negative move in the previous five – and drops to over a one-week low during the Asian session on Friday. Spot prices currently trade around the 1.2735 region and seem vulnerable to slide further amid some follow-through US Dollar (USD) buying.

The hotter-than-expected US Producer Price Index (PPI) pointed to still-sticky inflation and cooled market expectations for early interest rate cuts by the Federal Reserve (Fed). This, in turn, led to the overnight rise in the US Treasury bond yields, which, along with a generally weaker tone surrounding the equity markets, is seen underpinning the safe-haven Greenback and exerting some downward pressure on the GBP/USD pair.

Meanwhile, the current market pricing indicates a greater chance that the US central bank will begin cutting interest rates at the June policy meeting. This is reinforced by a fresh leg down in the US Treasury bond yields, which might hold back the USD bulls from placing aggressive bets. Apart from this, expectations that the Bank of England (BoE) will keep interest rates higher for longer should limit losses for the GBP/USD pair.

Traders might also prefer to wait for more cues about the Fed's rate-cut path before positioning for the next leg of a directional move for the USD. Hence, the focus will remain on the two-day FOMC meeting starting next Tuesday. In the meantime, Friday's release of the Empire State Manufacturing Index, Industrial Production and the Prelim Michigan Consumer Sentiment Index might provide some impetus to the GBP/USD pair.