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Dollar as a driver of the pound-dollar pairing

Dollar as a driver of the pound-dollar pairing | 01 October 2024

01 October 2024, GBP/USD

Dollar as a driver of the pound-dollar pairing

Events to watch out for today:

11:30 GMT+3. GBP - Manufacturing PMI

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

GBPUSD:

The GBP/USD pair is just south of the 1.3400 mark having started the new trading week, but intraday price action has been lacklustre after cautious statements from Federal Reserve (Fed) Chairman Jerome Powell reduced expectations of rate cuts and strengthened the US Dollar.

There is a limited amount of important data for Pound traders this week, but traders will be keeping an eye on the Bank of England's (BoE) monetary policy report hearing early Thursday. As for the US, markets will mainly be watching ahead of Friday's US non-farm payrolls report for September.

Fed officials made statements on Monday, with Atlanta FRB President Raphael Bostic drawing the line on the labour market and letting investors know what to expect in terms of further rate cuts when it comes to the data. Bostic noted that an NFP jobs print below 100k would be the magic number that could trigger further drastic action from the Fed.

Fed chief Jerome Powell followed Atlanta Fed Chairman Bostic in noting that investors should not expect any further sharp rate cuts unless there is a significant downturn in US economic data. This suggestion led to a rise in the dollar, with traders cutting their expectations for a 50bp rate cut in November. Fed Chairman Powell openly telegraphed to investors that after September's volley of sharp rate cuts, the Fed is likely to deliver only two more 25bp rate cuts next year.

Trading recommendation: Trade mainly with buy orders at the price level of 1.3405. We consider sell orders at the price level of 1.3310.

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David Johnson
Analyst of «FreshForex» company
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