11/10/24

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The Pound Sterling has shown a slight recovery against its major counterparts following the release of promising factory data and expected GDP growth for August. Despite this positive news, the currency faces downward pressure as traders speculate that the Bank of England (BoE) may consider interest rate cuts during its remaining policy meetings this year. Investors are also keenly awaiting the upcoming US Producer Price Index (PPI) data, which could influence the Federal Reserve’s interest rate strategy.

During Friday’s trading session in London, the Pound initially reacted favorably to the UK economic reports. However, the currency struggled to maintain its momentum despite the Gross Domestic Product (GDP) growth being in line with forecasts, as indicated by a 0.2% increase after stagnation in July. The Office for National Statistics (ONS) reported strong monthly increases in both Manufacturing and Industrial Production, with growth rates of 1.1% and 0.5%. Yet, annual figures revealed a contraction of 0.3% in Manufacturing and 1.6% in Industrial Production, although at a slower pace compared to previous months.

This encouraging economic data has improved the outlook for the UK economy, suggesting that the BoE may adopt a more gradual approach to policy easing. Most market participants anticipate that the central bank will implement only a single interest rate cut in its upcoming meetings this year. The next key indicators for the Pound will be the Employment data for the three months ending in August and the Consumer Price Index (CPI) report for September, which are expected to be released shortly and will heavily impact market expectations regarding BoE actions in November.

Against the US Dollar, the Pound remains under pressure, trading near a monthly low of 1.3010. The US Dollar Index continues to hold its ground around 103.00, fueled by a recent uptick in US consumer inflation readings, which diminished prospects for a significant rate reduction by the Federal Reserve next month. Market expectations lean towards a more modest cut of 25 basis points instead. All eyes are now on the upcoming US PPI data, which is anticipated to show a slight slowdown in the annual figure while core PPI may indicate a faster increase.

Overall, the outlook for the GBP/USD pair appears vulnerable, as it trades beneath important moving averages and key resistance levels. Analysts suggest that a decline below the psychological support level of 1.3000 could signal further bearish momentum for the Pound.