GBP/USD gains traction above 1.2650, eyes on US PMI data

• GBP/USD edges higher to 1.2655 in Monday’s early Asian session. 
• The softer US PCE inflation data prompted speculation that the Fed will cut the rate this year.
• The Opposition Labor Party is expected to win over the UK Prime Minister Rishi Sunak-led Conservative Party.

The GBP/USD pair trades on a stronger note around 1.2655 during the early Asian session on Monday. The US Dollar (USD) edges lower as the US Personal Consumption Expenditures (PCE) Price Index for May eased to its lowest annual rate in more than three years, which provides some support to the major pair. Traders await the US June ISM Purchasing Managers Index (PMI) for fresh impetus, which is due on Monday. 

The US core PCE, the Federal Reserve’s (Fed) preferred inflation measure, continued to cool in May, prompting speculation that the Fed will cut the interest rate this year. The core PCE figure climbed 2.6% from 2.8% in April, matching the forecast. The headline PCE increased 2.6% YoY in May from 2.7% prior, in line with the estimation.  

The Fed officials emphasized in recent weeks that they will cut interest rates when they gain confidence that inflation has decelerated to the 2% target. New York Fed President John Williams said that inflation is still at problematic levels and the US central bank will act to lower it. Fed Governor Michelle Bowman noted that while current Fed policies should be enough to bring inflation back to target, adding that the central bank shouldn't be unwilling to weigh further rate cuts if inflation data remains stubborn.

The general election in the United Kingdom will be held on Thursday and this event is likely to trigger the volatility in the pair. According to the latest exit polls, the Opposition Labor Party is expected to win over the UK Prime Minister Rishi Sunak-led Conservative Party.