23 September 2024, GBP/USD
Event to watch out for today:
11:30 GMT+3. GBP - Composite PMI
16:45 GMT+3. USD - Composite PMI
GBPUSD:
GBP/USD slides to 1.3310, breaking a three-day winning streak in the early Asian session on Monday. A moderate recovery in the US dollar (USD) is putting pressure on the major pair. Investors will focus on UK and US Purchasing Managers' Index (PMI) data due out later on Monday.
Last week, the US Federal Reserve (Fed) cut its key overnight lending rate by half a percent, marking the first interest rate cut since the start of the Covid pandemic. The Fed statement noted: “The Committee gained greater confidence that inflation is moving steadily toward 2 percent and believes that the risks to the achievement of employment and inflation objectives are roughly balanced.”
Fed Chairman Jerome Powell was cautious not to declare victory over inflation as price pressures continue to ease. The Personal Consumption Expenditures (PCE) index, the Fed's preferred measure of inflation, to be released on Friday, may provide some hints about inflation progress and the outlook for U.S. interest rates. Meanwhile, uncertainty over the US economic outlook and growing expectations of a Fed rate cut this year will continue to depress the US Dollar against the Pound Sterling (GBP).
On the other hand, Bank of England (BoE) Governor Andrew Bailey stated that “it is vital that inflation remains low” and to do so “we must be careful not to cut interest rates too quickly or too much”. At its last monetary policy meeting, the Bank of England decided to leave the interest rate at 5.0%. This decision came a day after UK inflation data (Consumer Price Index (CPI)) was unchanged at 2.2% y/y in August.
Trading recommendation: Trade predominantly with Buy orders from the current price level.
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