GBPUSD – Flat
Event to watch out for today:
15:30 GMT+3. USD – Unemployment Claims
GBPUSD:
The Pound-Dollar pair broke its three-day losing streak, trading near 1.2700 during the Asian session on Thursday. The gains could be driven by a weaker US Dollar (USD) as the US Federal Reserve (Fed) is expected to begin cutting rates more aggressively in September.
According to the CME FedWatch tool, the probability of the US Federal Reserve (Fed) cutting interest rates by 50 basis points (bps) in September is 72.0%, up from 11.8% a week earlier. The expectation of deeper rate cuts could put pressure on the US Dollar in the near term.
According to Reuters, Federal Reserve Bank of San Francisco President Mary Daly expressed confidence earlier this week that U.S. inflation is moving toward the Fed’s 2% target. Daly noted that „risks to Fed mandates are becoming more balanced and that there is an openness to the possibility of rate cuts at upcoming meetings.“
As for the British Pound, rising risk aversion associated with escalating tensions in the Middle East may cause traders to abandon risk-sensitive currencies such as the Pound Sterling (GBP). According to two US intelligence officials, Iran and its allies are preparing a potential retaliatory strike against Israel. Such a response is expected following the recent assassinations of a top Iranian Hezbollah military commander in Lebanon and a senior Hamas leader in Tehran, according to CNN.
Meanwhile, the British pound’s gains may be tempered by increased expectations that the Bank of England will cut rates by 25 basis points at its August meeting. In addition, market expectations now include the possibility of two more quarter-point rate cuts by the Bank of England before December.
Trading recommendation: Watch the level of 1.2700, if the level is fixed above, take Buy positions. On the rebound take Sell positions.
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