GBP/USD remains on the defensive near 1.2350, investors await UK, US PMI data

• GBP/USD extends its downside around 1.2350 in Tuesday’s early Asian session.
• Several Fed officials emphasized the US central bank is not in a hurry on interest rate cuts.
• Investors continue to price in the BoE will cut the interest rate earlier than the US Fed. 

The GBP/USD pair remains on the defensive near 1.2350, the lowest since mid-November on Tuesday during the early Asian session. The USD Index (DXY) consolidates its gains above 106.10 as traders await the preliminary S&P Global Purchasing Managers Index (PMI) data from the US and UK for April.

The Federal Reserve (Fed) policymakers agreed that inflation in the US is coming down slowly, but remains high. Therefore, the US central bank is not in a hurry on interest rate cuts. Atlanta Fed President Raphael Bostic noted that interest rates will have to be kept at a "restrictive level" and might only ease "at the end of 2024”. Meanwhile, Chicago Fed President Austan Goolsbee signaled a longer timeline for rate cuts as progress on inflation had "stalled.”. The hawkish stance of the Fed on interest rates so far this year has boosted the US Dollar (USD) and created a headwind for the GBP/USD pair.

On Monday, the Chicago Fed National Activity Index improved to 0.15 in March from 0.09 in the previous reading, according to the Fed Bank of Chicago. The attention will shift to the April PMI reports, due later on Tuesday. Both manufacturing and Services PMI figures are projected to improve in April. If the reports show a stronger-than-expected outcome, this could provide some support to the Greenback and cap the major pair’s upside.

On the other hand, interest rate futures are fully priced in a first quarter-point interest rate cut by the Bank of England for August and see two rate cuts before the end of the year. The growing speculation that the UK central bank will cut the interest rate earlier than the US Fed exerts some selling pressure on the Pound Sterling (GBP). Last week, BoE Deputy Governor Dave Ramsden said the progress on UK inflation and the downbeat economic outlook will allow the BoE to begin the rate cut cycle earlier than previously expected. Investors have priced in a 60% odds of a June rate cut near 60%, per Reuters.