GBPUSD – Flat
GBPUSD:
The US Dollar (USD) retreated from a two-year high on Friday after the November Personal Consumption Expenditure (PCE) price index report showed signs of slowing inflation and continued problems in the economy. This puts USD bulls on the defensive and provides some support for the GBP/USD pair. However, the Federal Reserve’s (Fed) tightening bias may continue to act as a tailwind for the Dollar.
The Fed, as expected, cut borrowing costs by 25 basis points (bps) last Wednesday, but said it would slow the pace of rate cuts in 2025. This continues to push US Treasury yields higher, which, along with geopolitical risks from the protracted war between Russia and Ukraine and tensions in the Middle East, could put pressure on GBP/USD.
In addition, the Bank of England’s (BoE) decision to leave interest rates unchanged last week may deter traders from aggressively bullish bets on the British Pound (GBP). This could help to keep pressure on the GBP/USD pair.
Market participants are now awaiting the release of the Bank of England’s quarterly report ahead of the publication of the Conference Board’s US Consumer Confidence Index at the start of the North American session. Nevertheless, the aforementioned fundamental backdrop makes us expect strong follow-through buying before confirming that the GBP/USD pair has bottomed out in the near-term.
Trading recommendation: Watching the level of 1.2600, trading mainly with Sell orders.
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