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The UK is on track for an interest rate cut

The UK is on track for an interest rate cut | 18 April 2024

18 April 2024, GBP/USD

The UK is on track for an interest rate cut

Event to pay attention to today:

17:00 GMT+3. USD - Existing Home Sales

GBPUSD:

The GBP/USD pair is trading at 1.2450 in the early hours of Asian trading on Thursday. Weaker UK inflation data has led to expectations that the Bank of England (BoE) will start cutting interest rates in the coming months, which is negatively affecting the Pound Sterling (GBP) against the US Dollar.

The Bank of England has indicated that the UK is still on track to cut interest rates, given that recent data has shown a further weakening in price growth in the economy. On Wednesday, the Office for National Statistics (ONS) revealed that UK consumer price index (CPI) inflation fell to 3.2 per cent in the 12 months to March, the lowest in two and a half years. The figure was down from the previous reading of 3.4 per cent. However, investors are expecting the first rate cut in August or September, according to LSEG data.

In the US, encouraging retail sales data for February released earlier this week indicated a robust United States economy. This has led to speculation that the Federal Reserve (Fed) may postpone this year's easing cycle. Fed Chairman Jerome Powell said he would wait longer than previously expected to cut rates after an unexpected rise in inflation figures. Powell further stated that the US central bank will require additional time to ensure that inflationary pressures are on a trajectory towards the Federal Reserve's 2% target before implementing a reduction in borrowing costs. This, in turn, provides some support for the US dollar and limits the potential for gains in the GBP/USD exchange rate.

Trading recommendation: Trade with buy orders when the price reaches 1.2480. Sell at the price level of 1.2440.

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David Johnson
Analyst of «FreshForex» company
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