Pound Sterling trades with caution ahead of flash UK-US PMI data

• The Pound Sterling demonstrates caution against its peers ahead of the preliminary UK-US PMI data for August.
• BoE officials might hesitate to cut interest rates in the remainder of the year.
• Investors await Fed Powell's speech at the Jackson Hole Symposium.

The Pound Sterling (GBP) trades cautiously against its major peers on Thursday as investors await the preliminary United Kingdom (UK) S&P Global Purchasing Managers' Index (PMI) data for August, which will be published at 08:30 GMT.

Economists expect the UK Composite PMI to have grown at a slightly faster pace to 51.6 as activities in the services sector are estimated to have remained steady. Meanwhile, the Manufacturing PMI is seen at 48.3, up from 48.0 in July, suggesting that the manufacturing sector business activity contracted again, but at a moderate pace.

Investors will also focus on the PMI data to gauge whether private firms are still hesitant to increase the labor force. Lately, labor market indicators signaled that business owners are reluctant to hire fresh workers to offset the increase in employers' contributions to social security schemes.

Meanwhile, Bank of England (BoE) officials are expected to be reluctant to cut interest rates in the remainder of the year as the UK inflation is proving to be persistent. The Office for National Statistics (ONS) reported on Wednesday that price pressures grew at a faster-than-expected pace in July. The headline Consumer Price Index (CPI) came in at 3.8% on year, the highest level seen in almost 18 months. The core CPI - which excludes volatile items such as food, energy, alcohol and tobacco - also grew at an annual pace of 3.8%.

Earlier this month, the BoE reduced interest rates by 25 basis points (bps) to 4%, with a narrow majority, and guided a "gradual and careful" monetary easing approach.

Daily digest market movers: Pound Sterling declines against US Dollar for fourth straight trading day

• The Pound Sterling extends its losing streak for the fourth trading day against the US Dollar (USD) on Thursday. The GBP/USD pair slides to near 1.3440 as the US Dollar trades higher, with investors awaiting the Federal Reserve (Fed) Chair Jerome Powell's speech at the Jackson Hole (JH) Symposium on Friday.
• At the time of writing, the US Dollar Index (DXY), which tracks the Greenback's value against six major currencies, is rising close to the weekly high near 98.45.
• Market experts believe that gains in the US Dollar are driven by hopes that Fed Chair Powell will argue in favor of holding interest rates at their current levels. "Given the relatively high bar for Powell to meet, there's a bit of risk being baked into the markets that he leans to the hawkish side and the proverbial rug gets pulled from beneath investors," analysts at Capital.com said, Reuters reported.
• The Federal Open Market Committee (FOMC) minutes of the July monetary policy meeting showed on Wednesday that a majority of members, including Jerome Powell, argued in favor of a restrictive monetary policy stance as they need time to have more clarity on the "magnitude and persistence of higher tariffs' effects on inflation".
• According to the CME FedWatch tool, there is an almost 81.6% chance that the Fed will cut interest rates by 25 bps to the 4.00%-4.25% range in the September meeting.
• Meanwhile, US President Donald Trump has attacked the Fed's independence again by calling Fed Governor Lisa Cook to resign after citing allegations made by one of his political allies about mortgages Cook holds in Michigan and Georgia. In response, Cook has stated that she is "gathering accurate information to provide facts", and "has no intention of being pressured to step down".
• In Thursday's session, investors will focus on the preliminary US S&P Global PMI report for August, which will be published at 13:45 GMT. Economists expect the Composite PMI to have expanded moderately.

Technical Analysis: Pound Sterling extends correction to near 20-day EMA

The Pound Sterling falls slightly against the US Dollar on Thursday. The GBP/USD pair corrects to near the 20-day Exponential Moving Average (EMA), which trades around 1.3460, suggesting that the near-term trend has become uncertain.

The 14-day Relative Strength Index (RSI) drops to near 50.00. indicating a lack of momentum.

Looking down, the August 11 low of 1.3400 will act as a key support zone. On the upside, the July 1 high near 1.3790 will act as a key barrier.