GBP/USD resumes upside near 1.2800 on mixed US data, Fed rate cut expectation

• GBP/USD holds positive ground around 1.2790 amid the firmer USD on Thursday. 
• The ISM said on Wednesday that its US Services PMI rebounded to 53.8% in May from 49.4% in April. 
• The UK S&P Global Services PMI reached a six-month low of 52.9 from 55.0 in April. 

The GBP/USD pair resumes upside near 1.2790 despite the rebound of US Dollar (USD). Traders started to price in two interest rate cuts by the Federal Reserve (Fed) this year as the US economy grew at a slower pace in the first quarter than projected earlier. Later on Thursday, the US weekly Initial Jobless Claims and Balance of Trade will be published. 

In the past few months, Fed officials emphasized the need to hold the rate higher for longer until the central bank gains confidence that inflation is moving toward the Fed’s 2% target. However, the downbeat US May ISM Manufacturing PMI report and weaker Q1 Gross Domestic Product (GDP) data have triggered the expectation of easing policy from the Fed in September, which weighs on the Greenback broadly. The markets are now pricing in a nearly 70% chance of a Fed rate cut in September, up from 54.9% at the beginning of the week, according to the CME FedWatch tool. 

The Institute for Supply Management (ISM) reported on Wednesday that the US Services PMI improved to 53.8 in May from 49.4 in April. This figure came in better than the estimation of 50.8.  

On the other hand, the UK services sector reported slower growth in May. The UK S&P Global Services PMI reached a six-month low of 52.9 from 55.0 in April, in line with the expectation. Meanwhile, the Composite PMI dropped to a two-month low of 53.0 in May from a one-year high of 54.1 in April. Amid the absence of the top-tier UK economic data releases, the GBP/USD pair will be influenced by the USD.