• GBP/USD is looking to recapture a two-month high at 1.2450 as the risk profile remains upbeat.
• The USD Index is defending the 102.20 support in hopes of the continuation of a policy-tightening spell by the Fed.
• Mixed views on BoE’s monetary outlook will keep Pound Sterling volatile.

The GBP/USD pair is aiming to re-test its two-month high at 1.2448 in the Asian session. The Cable is attracting bullish bets despite expectations for a steady monetary policy by the Federal Reserve (Fed) have eased. The US Dollar Index (DXY) is defending the 102.20 support on hopes that receding fears of the United States banking fiasco have opened the door for the continuation of the policy-tightening spell by the Fed.

As per the CME Fedwatch tool, the odds of an unchanged monetary policy by the Fed in May have slipped below 50%.

The USD Index is demonstrating topsy-turvy moves above 102.20 as investors are awaiting the release of the core US Personal Consumption Expenditure (PCE) Price Index (Feb) data. According to the estimates, the core PCE Price Index is expected to remain flat at 4.7% annually. Meanwhile, the prices of goods and services have accelerated by 0.4%, lower than the former expansion of 0.6%.

There is evidence that conveys the United States inflation is in a clear downtrend, however, the inflation rate is still more than three times the desired rate, and achieving price stability is not a cakewalk, which solidifies the case of one more rate hike announcement by Fed chair Jerome Powell in May.

S&P500 futures have gained further in the Tokyo session after a bullish Thursday as ebbing US banking jitters have infused confidence among investors, portraying extremely positive market sentiment. Also, Fed Vice Chair for Supervision Michael Barr assured investors that the failure of a couple of lenders is unable to lead to a widespread contagion.

Going forward, the Pound Sterling will show a power-pack action amid the release of the United Kingdom Gross Domestic Product (GDP) data. According to the estimates, UK’s growth rate has remained stagnant in the fourth quarter of CY2022. Annual GDP is expected to remain steady at 0.4%.

Mixed views on the Bank of England’s (BoE) monetary outlook will keep Pound Sterling volatile. BoE policymakers are confident about the quick softening of UK inflation ahead, however, rising food inflation and shortage of labor are telling a different story.