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10/12/24
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GBP/USD Faces Hurdles Ahead of US CPI Data as Rate Cut Expectations Rise
The GBP/USD currency pair is likely to encounter hurdles as traders exercise caution ahead of the upcoming US Consumer Price Index (CPI) data release scheduled for Wednesday. The likelihood of Federal Reserve rate cuts has risen, with market indicators suggesting a 85.8% chance of a 25 basis point reduction in December. Meanwhile, expectations regarding economic performance in the UK seem to be improving, with data set to be released on Friday hinting at a rebound for the economy in October.
As of Tuesday’s Asian trading session, GBP/USD held steady around 1.2750, maintaining stability for a second consecutive day. The pair’s performance is influenced by the strengthening US dollar, driven by market apprehension related to the impending CPI figures and overall economic indicators.
Recent insights from the Federal Reserve Bank of New York’s consumer survey reveal that American consumers are grappling with uncertain economic expectations. However, optimism has surged in relation to personal financial conditions and the federal government’s fiscal health, with many indicating an improved outlook on debt affordability and credit availability.
Last Friday’s Non-Farm Payroll (NFP) data for November showcased a robust increase of 227,000 jobs, surpassing forecasts. Additionally, average hourly earnings remained steady with a month-over-month growth rate of 0.4%. These factors have heightened market expectations for potential interest rate reductions by the Fed, particularly as traders now foresee a 85.8% likelihood of a cut during the mid-December meeting.
In the UK, the Pound Sterling is nearing a four-week high as investors look forward to significant economic releases and central bank policy decisions. Economic data anticipated for Friday is expected to reflect positive trends in the UK economy for October, particularly in the manufacturing sector. The Bank of England is likely to maintain current interest rates during its upcoming meeting on December 19. Concerns surrounding economic uncertainties continue to linger, prompting remarks from central bank officials on the importance of vigilance in navigating these challenges.
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