• The Pound Sterling bounces back from 1.3150 as the US Dollar trades subdued ahead of US core PCE inflation data for July.
• Investors see the annual core PCE inflation accelerating to 2.7% from 2.6% in June.
• The policy-easing spell from the BoE is expected to be slower than that of its major peers.

The Pound Sterling (GBP) finds cushion near 1.3150 after a two-day sell-off against the US Dollar (USD) in Friday’s London session. The GBP/USD pair gains ground as the US Dollar exhibits a subdued performance in the countdown to the release of the United States (US) Personal Consumption Expenditure Price Index (PCE) data for July, which will be published at 12:30 GMT. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, falls slightly to 101.30.

Economists expect that the annual core PCE inflation, which excludes volatile food and energy prices, rose at a higher pace of 2.7% from June’s reading of 2.6%, with monthly figures growing steadily by 0.2%.

Historically, the impact of the PCE inflation data has been high as it is the Federal Reserve’s (Fed) preferred inflation gauge for decision-making on interest rates. This time, the impact of the underlying inflation data is expected to remain limited on the US Dollar and market speculation for the Fed’s interest rate cut path this year unless there is a significant deviation from estimates and the former release.

With increased confidence that inflation is on track to sustainably decline to the Fed’s target of 2%, officials are now worried about growing risks to US labor market strength. “The balance of risks to our mandate has changed”, said Fed Chair Jerome Powell last week in his speech at the Jackson Hole (JH) Symposium. The comments from some other Fed policymakers have also indicated that the central bank won’t hesitate to reduce its key borrowing rates aggressively in case of further evidence of a sharp deterioration in the labor market emerges.