GBP/USD declines ahead of Fed rate meeting in midweek | 18 September 2024

Events to pay attention to today:

09:00 GMT+3. GBP - Consumer Price Index

21:00 GMT+3. USD - FOMC Rate Decision

GBPUSD:

On Wednesday, the GBP/USD fell towards 1.3150 as investors adopted a cautious stance ahead of the widely anticipated Federal Reserve (Fed) rate cut, which is expected to commence on Wednesday.

UK CPI inflation data is scheduled for release on Wednesday morning, but the inconclusive nature of the inflation figures is unlikely to provide significant market movement, as they are already largely reflected in current pricing. The final UK CPI inflation data for August is expected to show a 0.3% m/m increase, compared to the previous -0.2% decline. Additionally, the annual CPI is expected to show a 3.5% y/y increase, up from the previous reading of 3.3%.

The US retail sales data for August supported expectations of a rate cut by the Federal Reserve, with sales rising 0.1% compared to the median forecast of a -0.2% decline. The retail sales figure for July was also revised upwards to 1.1%, although core retail sales (excluding auto purchases) rose only 0.1% versus a forecast of 0.2%.

The only significant event on this week's data list is the Federal Reserve's upcoming rate meeting on Wednesday. Since the beginning of the year, markets have been anticipating a reduction in the federal funds rate, with investors requesting a rate cut in March. CME's FedWatch tool indicates that the betting markets are still divided over the depth of the first expected Fed rate cut since early 2020. Traders estimate a 60% chance of a double 50 bp rate cut to kick off the Fed's next rate cut cycle, while the remaining 40% expect a more moderate 25 bp rate cut.

Trading recommendation: We follow the level of 1.3150, when fixing above it we take Buy positions, when rebounding we take Sell positions.

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