GBP/USD suffers due to the strength of the Dollar and the rise in US Treasury bond yields.

• GBP/USD falls more than 0.40% to 1.2657, with dollar strength and rising Treasury yields overshadowing the pound amid equity volatility.
• The reduction of the deficit in the United Kingdom stimulates speculation about a tax cut; The Bank of England could maintain rates in February, with possible cuts from May.
• Traders are watching preliminary S&P Global PMIs in the UK and US; US Q4 GDP and core PCE price index as key developments.

The GBP/USD pair plummeted more than 0.40% in the middle of the North American session amid the strength of the US Dollar (USD) and the rise in Treasury bond yields, which supported the Dollar to the detriment of the pound sterling (GBP). At the time of writing, the pair is trading at 1.2657 after reaching a daily high of 1.2747.

The Pound faces market pressures due to the US GDP figures.

US stocks are mixed as companies report fourth-quarter results last year. In terms of data, the Richmond Fed's composite and manufacturing index continued to deteriorate in January, going from -11 to -15, while the services index rose from 0 to 4.

During the European session, the UK's Office for National Statistics (ONS) revealed that the budget deficit was narrower than last year's figures, with the figure at £7.77 billion in December, down from £13.71 billion last year. . This could open the door to a tax cut, as Chancellor Hunt and British Prime Minister Rishu Sunak have expressed in the spring budget to be presented on March 6.

Moving on to central banks, the Bank of England (BoE) is not expected to move the needle in February, according to a Reuters poll. However, investors see Governor Bailey and company lowering rates as early as May, with three additional cuts, which would drag the bank rate from 5.25% to 4.25%.

In the United States, the Federal Reserve is expected to ease policy in June, according to a Reuters poll. Analysts at TD Securities noted: “We continue to expect the Committee to maintain a cautious stance in the near term, even amid an improving consumer price profile, as the Fed would like to ensure that the recent rally in inflation is sustainable.” The survey suggests that most analysts estimate that the federal funds rate (FFR) would be adjusted from 5.25%-5.50% to 4.25%-4.50%.

The economic agenda in the United Kingdom will include on Wednesday, as in the United States, the preliminary PMI indices from S&P Global. On Thursday in the United States, preliminary GDP figures for the fourth quarter of last year and the Fed's preferred inflation indicator, the core personal consumption price index (PCE), will be published.

GBP/USD Technical Levels