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02/09/24
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GBP/USD Resilient Amid Shifting US Monetary Policy Expectations
The GBP/USD exchange rate is currently showing resilience, hovering around 1.3135 during Monday’s early trading session in Asia. This movement brings an end to a three-day decline for the pair, suggesting a turnaround amid a backdrop of shifting monetary policy expectations in the United States. In light of an upcoming week lacking significant economic data out of the UK, the focus will primarily be on the performance of the US Dollar.
Anticipation surrounding the US Federal Reserve’s monetary policy is contributing to a softer USD. Recently, the Fed Chair indicated the possibility of an imminent rate cut, reflecting concerns regarding the labor market. Current trading sentiment indicates nearly a 70% likelihood of a 25 basis points reduction in rates at the Fed’s September meeting, with a 30% chance for a more substantial 50 basis points cut.
Upcoming employment figures from the US will play a critical role in shaping the USD’s trajectory. Reports are expected to reveal an addition of approximately 163,000 jobs in August, alongside a slight dip in the unemployment rate to 4.2%. Additionally, average hourly earnings are likely to show a modest increase of 0.3% month-over-month in July. Should these figures fall short of expectations, concerns over a potential economic slowdown could further weaken the Dollar.
On the other side of the ledger, the Bank of England’s approach to monetary policy is seen as cautious and gradual. Economists predict that the BoE will implement one final rate cut of 25 basis points before the year concludes. This expectation may lend support to the Pound Sterling, as investors adjust their outlooks on future interest rate movements in the UK.
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