GBP/USD trades below 1.2950 near 10-week lows, PMI figures awaited

• GBP/USD holds ground ahead of PMI data release from both nations.
• BoE Governor Andrew Bailey indicated that inflation is currently below the target level primarily because of annual base effects.
• The US Dollar may appreciate due to the prevailing sentiment of nominal rate cuts by the Fed in 2024.

The GBP/USD pair trades around 1.2930 during the Asian session on Thursday, staying near its 10-week low of 1.2907 reached on Wednesday. Traders are likely to focus on the Purchasing Managers Index (PMI) figures from both the United Kingdom (UK) and the United States (US), which are scheduled for release during the day.

During a discussion at the Institute of International Finance's annual membership meeting in Washington, D.C., on Wednesday, Bank of England Governor Andrew Bailey stated that inflation is currently below target due to annual base effects. Bailey noted that the high savings rate indicates consumer caution and added that pension funds should not be required to make compulsory allocations to UK assets.

The upward movement of the GBP/USD pair can be linked to a slight decline in the US Dollar (USD), influenced by lower US Treasury yields. As of this writing, the 2-year and 10-year yields on US Treasury bonds are at 4.06% and 4.22%, respectively. However, the US Dollar Index (DXY), which measures the USD's value against six major currencies, surged to its highest level since late July, reaching 104.57 on Wednesday.

The US Dollar may further appreciate as signs of economic resilience and increasing inflation concerns have diminished the likelihood of a significant rate cut by the Federal Reserve in November. According to the CME FedWatch Tool, there is an 88.9% probability of a 25-basis-point rate cut, with no expectation for a larger 50-basis-point cut.