• Pound Sterling treads with caution amid volatile market sentiment.
• High UK wage growth and service inflation are keeping price pressures sticky.
• Investors await the UK and US Manufacturing PMIs for fresh guidance.

The Pound Sterling (GBP) finds temporary support in Friday’s European session after closing negatively on Thursday. The GBP/USD pair may face more heat as higher monthly United States core Personal Consumption Expenditure Price Index (PCE) data for January has capped hopes of rate cuts by the Federal Reserve (Fed) in the June policy meeting.

US monthly core inflation data rose by 0.4% in January against a 0.1% increase in December, which was revised down from 0.2%. Price pressures were expected to grow at a higher pace, but the momentum is inconsistent with the agenda of achieving a 2% inflation target.

Meanwhile, a slightly uncertain market mood keeps the Pound Sterling on edge. In the broader term, the Pound Sterling could benefit from hopes that the Bank of England (BoE) will begin reducing interest rates after the Fed. 

Investors anticipate that the BoE and the Fed will start cutting interest rates in August and June, respectively. This will ease policy divergence between the central banks for some time. The Pound Sterling would attract higher foreign inflows if the BoE maintained a hawkish stance for a longer period than other central banks.

In today’s session, the UK’s S&P Global/CIPS Manufacturing PMI and the US ISM Manufacturing PMI for February will be in focus. The UK Manufacturing PMI is expected to remain unchanged at 47.1. While the US Manufacturing PMI is anticipated to have risen to 49.5 from 49.1 in January.