- GBP/USD scales higher for the second straight day and remains supported by a weaker US Dollar.
- Dovish Fed expectations and the optimism over Chinese stimulus undermine the safe-haven buck.
- Bets that the BoE will start cutting rates during the first half of 2024 might cap gains for the major.
The GBP/USD pair attracts some dip-buying following an early dip to the 1.2440 area on Monday and builds on its steady ascent through the early part of the European session. Spot prices climb back closer to the 1.2500 psychological mark, with bulls now awaiting a sustained move and acceptance above the 100-day Simple Moving Average (SMA) before placing fresh bets.
The US Dollar (USD) selling bias remains unabated in the wake of dovish Federal Reserve (Fed) expectations, which, in turn, is seen pushing the GBP/USD pair higher for the second successive day. Investors now seem convinced that the US central bank is done with its policy tightening campaign and the bets were reaffirmed by the softer US CPI report released last week. Moreover, the markets are now pricing in the possibility that the Fed will start cutting rates as soon as March 2024.
A turnaround in expectations for the Fed's future policy action dragged the yield on the benchmark 10-year US government bond to a two-month low on Friday. Apart from this, the latest optimism over additional stimulus from China turns out to be another factor undermining the Greenback's safe-haven status and lending support to the GBP/USD pair. In fact, Chinese officials vowed to roll out more policy support for the country’s beleaguered real estate sector, boosting investors' confidence.
With the USD price dynamics turning out to be an exclusive driver of the GBP/USD pair's positive move, bulls seem unaffected by the fact that the markets anticipate the Bank of England (BoE) to begin cutting interest rates from their 15-year peak. In fact, interest rate futures have fully priced in a 25 bps BoE rate cut for August 2024 and a second rate cut in November 2024. Moreover, there is a greater than 50% chance that the BoE will start the policy easing cycle by June 2024.
In the absence of any relevant market-moving economic releases, either from the UK or the US, the mixed fundamental backdrop makes it prudent to wait for a breakout through the 100-day SMA before placing fresh bullish bets. Market participants now look forward to scheduled speeches by BoE Governor Andrew Bailey and Richmond Fed President Thomas Barkin to grab short-term trading opportunities later during the early North American session.
Technical levels to watch
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD breaks below 1.1000 on stellar NFP
The buying bias in the Greenback gathers extra pace on Friday after the US economy created far more jobs than initially estimated in September, dragging EUR/USD to the area of new lows near 1.0950.
GBP/USD breaches 1.3100 after encouraging US Payrolls
The continuation of the uptrend in the US Dollar motivates GBP/USD to accelerates its losses and breaches 1.3100 the figure in the wake of the release of US NFP.
Gold rebounds from daily lows and flirts with $2,670
Following a post-NFP dip to the $2,640 region, Gold prices now embarks on an acceptable rebound and retest the area of $2,670 per ounce troy despite the marked advance in the US Dollar and rising US yields across the board.
US Payrolls surge in September, as 50bp rate cut ruled out
US payrolls data surprised on the upside in September, rising by 254k, smashing expectations of a 150k rise. The unemployment rate fell to 4.1% from 4.2%, average hourly earnings increased to a 4% YoY rate and there was a 72k upwards revision to the previous two months’ payrolls numbers.
RBA widely expected to keep key interest rate unchanged amid persisting price pressures
The Reserve Bank of Australia is likely to continue bucking the trend adopted by major central banks of the dovish policy pivot, opting to maintain the policy for the seventh consecutive meeting on Tuesday.
Five best Forex brokers in 2024
VERIFIED Choosing the best Forex broker in 2024 requires careful consideration of certain essential factors. With the wide array of options available, it is crucial to find a broker that aligns with your trading style, experience level, and financial goals.