GBP/USD pair edges lower to 1.3310, snapping the three-day winning streak during the early Asian session on Monday. The modest recovery of the US Dollar (USD) weighs on the major pair. Investors will focus on the flash reading of the UK and US Purchasing Managers Index (PMI) data, which are due later on Monday.

The US Federal Reserve (Fed) lowered its key overnight borrowing rate by a half percentage point last week, the first interest rate cut since the early days of the Covid pandemic. The Fed statement noted, "The Committee has gained greater confidence that inflation is moving sustainably toward 2 percent, and judges that the risks to achieving its employment and inflation goals are roughly in balance."  Fed Chair Jerome Powell was cautious not to declare a victory over inflation as pricing pressures continue to come down.

The US Personal Consumption Expenditures (PCE) index, the Fed's preferred inflation gauge, which will be released on Friday, might offer some hints about the progress on inflation and the US interest rate outlook. Meanwhile, the uncertainty surrounding the US economic outlook and rising expectations of the Fed rate cut later this year will continue to drag the USD lower against the Pound Sterling (GBP).

On the other hand, Bank of England (BoE) Governor Andrew Bailey said that it is "vital that inflation stays low," and for that, "we need to be careful not to cut the interest rate too fast or by too much." The BoE decided to hold interest rates at 5.0% in its most recent monetary policy meeting. The decision came one day after the UK's Consumer Price Index (CPI) inflation data held steady at 2.2%  YoY in August.

Source: FxStreet