- GBP/USD struggles to gain any meaningful traction and oscillates in a range on Thursday.
- Bets that the Fed is done raising rates cap the USD recovery and lend support to the pair.
- Expectations that the BoE will start cutting rates in 2024 act as a headwind for the GBP.
The GBP/USD pair consolidates the overnight rejection slide from the 100-day Simple Moving Average (SMA), around the 1.2500 psychological mark, or a two-month top, and oscillates in a narrow band during the Asian session on Thursday. Spot prices, meanwhile, manage to hold above the 1.2400 round figure and remain at the mercy of the US Dollar (USD) price dynamics.
The USD Index (DXY), which tracks the Greenback against a basket of currencies, struggles to capitalize on the previous day's modest recovery from its lowest level since September 1 amid dovish Federal Reserve (Fed) expectations. The bets were lifted by the softer US CPI report released on Tuesday, which showed consumer inflation was cooling faster than anticipated. Moreover, the markets are now pricing in a greater chance that the Fed will start cutting rates during the first half of 2024, which keeps the US Treasury bond yields depressed and acts as a headwind for the Greenback.
Apart from this, the prevalent risk-on environment is seen as another factor undermining the safe-haven buck and lending some support to the GBP/USD pair. The upside, however, remains capped in the wake of growing acceptance that the Bank of England (BoE) will soon start cutting interest rates, bolstered by softer UK consumer inflation figures on Wednesday. In fact, the headline UK CPI was flat on a monthly basis and the yearly rate decelerated sharply from 6.7% to 4.6% in October – hitting a two-year low. Moreover, the Core CPI also fell to 5.7% from 6.1% in September.
The aforementioned mixed fundamental backdrop warrants some caution for aggressive traders and before positioning for a firm near-term direction in the absence of any relevant macro data from the UK on Thursday. The US economic docket, meanwhile, features the usual Weekly Initial Jobless Claims, the Philly Fed Manufacturing Index and Industrial Production figures. This, along with the US bond yields and the broader risk sentiment, might influence the USD price dynamics and allow traders to grab short-term opportunities around the GBP/USD pair.
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 stays near 1.0400 in thin holiday trading
EUR/USD trades with mild losses near 1.0400 on Tuesday. The expectation that the US Federal Reserve will deliver fewer rate cuts in 2025 provides some support for the US Dollar. Trading volumes are likely to remain low heading into the Christmas break.
GBP/USD struggles to find direction, holds steady near 1.2550
GBP/USD consolidates in a range at around 1.2550 on Tuesday after closing in negative territory on Monday. The US Dollar preserves its strength and makes it difficult for the pair to gain traction as trading conditions thin out on Christmas Eve.
Gold holds above $2,600, bulls non-committed on hawkish Fed outlook
Gold trades in a narrow channel above $2,600 on Tuesday, albeit lacking strong follow-through buying. Geopolitical tensions and trade war fears lend support to the safe-haven XAU/USD, while the Fed’s hawkish shift acts as a tailwind for the USD and caps the precious metal.
IRS says crypto staking should be taxed in response to lawsuit
In a filing on Monday, the US International Revenue Service stated that the rewards gotten from staking cryptocurrencies should be taxed, responding to a lawsuit from couple Joshua and Jessica Jarrett.
2025 outlook: What is next for developed economies and currencies?
As the door closes in 2024, and while the year feels like it has passed in the blink of an eye, a lot has happened. If I had to summarise it all in four words, it would be: ‘a year of surprises’.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.