GBPUSD – Flat
GBPUSD:
The Pound-Dollar pair is rising at the start of a busy week and so far appears to have broken a three-day losing streak, reaching the 1.2600 area, or a more than two-week low. Spot prices for the currency are trading around 1.2630-1.2635, up 0.10% on the day, although a significant rate hike seems unlikely ahead of key central bank events this week.
The US Federal Reserve (Fed) will announce its policy decision on Wednesday, followed by the Bank of England (BoE) meeting on Thursday. The US central bank is expected to cut borrowing costs for the third consecutive meeting, although traders are factoring in the possibility of a slower pace of rate cuts next year. Therefore, the accompanying statement, updated economic forecasts, including the so-called dot plot, and Fed Chairman Jerome Powell’s comments at the post-meeting press conference will be scrutinized for clues about the future path of rate cuts. This, in turn, will play a key role in influencing US Dollar price action in the near term and provide some momentum to the GBP/USD pair.
Meanwhile, the UK central bank is expected to maintain the status quo and leave interest rates unchanged. Moreover, the Bank of England emphasized that it is taking a gradual approach to lower interest rates amid rising inflation expectations. In fact, the Bank of England and other forecasters expect inflation to rise next year on the back of UK Finance Minister Rachel Reeves‘ big-spending budget. Nevertheless, Bank of England Governor Andrew Bailey’s dovish outlook, which foreshadows four interest rate cuts in 2025, may deter traders from aggressively bullish bets on the British Pound (GBP) and serve as a headwind for the GBP/USD pair. This, in turn, warrants some caution before confirming that spot prices have bottomed around the 1.2600 mark.
Investors will also face the release of important macroeconomic data from the UK and the US this week, starting with flash PMIs on Monday. In addition, monthly UK employment data as well as US retail sales on Tuesday, followed by UK consumer inflation data on Wednesday, final US GDP data on Thursday and UK retail sales on Friday should bring volatility to the GBP/USD pair.
Trading recommendation: Trade predominantly with Sell orders from the current price level.
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