GBP/USD continues its upward momentum for the second consecutive session, hovering near 1.3360 during Asian trading hours on Tuesday. The Pound Sterling (GBP) is strengthening as the US Dollar (USD) softens in response to Moody's Ratings downgrading the US credit rating from Aaa to Aa1.

This downgrade echoes similar actions by Fitch Ratings in 2023 and Standard & Poor's in 2011. Moody's now anticipates that US federal debt will rise to approximately 134% of GDP by 2035, up from 98% in 2023, while projecting the federal budget deficit to widen to nearly 9% of GDP. The downgrade reflects concerns over surging debt-servicing costs, growing entitlement spending, and declining tax revenues.

Last week's US economic data added to pressure on the greenback, with inflation indicators such as the Consumer Price Index (CPI) and Producer Price Index (PPI) suggesting easing price pressures. These trends have boosted expectations for further Federal Reserve rate cuts in 2025. Additionally, weaker-than-expected US Retail Sales figures have intensified worries about prolonged economic sluggishness.

Looking ahead, investors are turning their focus to the United Kingdom's (UK) April CPI report, due Wednesday, for insight into the Bank of England's (BoE) policy trajectory. The core CPI which excludes food, energy, alcohol, and tobacco is forecast to rise by 3.6% year-over-year, slightly above the previous reading of 3.4%.

Source: fxstreet