GBP/USD awaiting new momentum from the Bank of England | 01 August 2024

Event to watch out for today:

14:00 GMT+3. GBP - MPC Official Bank Rate Votes

15:30 GMT+3. USD - Unemployment Claims

17:00 GMT+3. USD - ISM Manufacturing Index

GBPUSD:

The Pound-Dollar pair is unable to capitalize on the positive movement following the FOMC meeting and is fluctuating in a narrow trading range during the Asian session on Thursday. Spot prices are currently trading around the mid-1.2800s, almost unchanged for the day as traders prefer to take a wait-and-see approach in anticipation of the Bank of England (BoE) policy update.

Signs that global inflationary pressures are easing have fueled speculation that the UK central bank will cut interest rates later today. In fact, financial markets estimate the likelihood of the Bank of England cutting rates from a 16-year high of 5.25% to be more than 65%, and expect another quarter-point cut before the end of the year. This, in turn, will help to strengthen the British Pound (GBP) and boost the GBP/USD pairing.

However, investors are far from confident that the Bank of England will take immediate action as UK services inflation remains uncomfortably high. This, in turn, is deterring traders from placing fresh directional bets on the GBP/USD pair and resulting in a subdued range of price action. As such, the focus will be on the accompanying monetary policy statement and comments from Bank of England Governor Andrew Bailey at the post-meeting press conference.

Ahead of a key central bank risk event, the US Dollar (USD) selling bias following the FOMC meeting continues to provide some support for GBP/USD and should help limit the downside. The US central bank acknowledged recent progress in inflation and a cooling in the labor market. In addition, Fed Chairman Jerome Powell signaled the likelihood of a rate cut soon if inflation remains in line with expectations and led to a decline in US Treasury yields.

Trading recommendation: Trade predominantly with Buy orders from the current price level.

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