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29/11/24
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GBP/USD Soars to Two-Week High Amidst Dollar Weakness and Rate Cut Speculations
The GBP/USD currency pair extended its recent upward trend, reaching a two-week peak on Friday. The British Pound gained traction as market sentiment turned against the US Dollar, particularly in light of diminished expectations for a rate cut from the Bank of England in December. As geopolitical tensions and concerns over trade disputes loom, there may also be constraints on the USD’s downturn, limiting further gains for the GBP/USD pair.
During the Asian trading session, GBP/USD achieved a significant milestone, climbing over 200 pips from its weekly low to touch approximately 1.2715. This upsurge reflects a broader recovery from levels below 1.2500, which had marked its lowest point since May 2024. The current market dynamics indicate a weakened demand for the USD, facilitating this upward momentum in the British Pound.
The US Dollar Index, which measures the currency against a basket of peers, struggled to maintain its recent gains and hovered near a two-week low, influenced largely by expectations of a potential interest rate cut by the Federal Reserve next month. Market estimates now suggest there is a 70% probability that the Central Bank may reduce borrowing costs by 25 basis points in December. This outlook, coupled with declining US Treasury yields, has created headwinds for USD strength and provided added support for the GBP/USD pair.
In parallel, market participants are reassessing their expectations regarding the Bank of England’s monetary policy. Recent data indicating a faster pace of inflation growth in the UK has prompted traders to reduce their anticipations for another rate cut this year, bolstering confidence in the GBP. However, various factors, including geopolitical uncertainties and inflationary pressures in the US tied to potential fiscal policies, could temper bullish sentiment for GBP/USD and lead to cautious trading ahead.
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