25 November 2024, GBP/USD
GBPUSD:
The US Dollar Index (DXY) is pulling back from a two-year high as bulls decided to lock in some profits amid a sharp decline in US Treasury yields. In addition, the continuation of the risk-on rally in global stock markets is proving to be another factor undermining the safe-haven dollar and providing some support to the GBP/USD pair.
Reports that Israel is close to reaching a truce with the Hezbollah military group in Lebanon have fueled optimism for some détente in the protracted Middle East conflict. In addition, the appointment of Scott Bessent as US Treasury Secretary removed a major point of uncertainty in the markets and eased fears of a major trade war under the new Trump administration, which in turn boosted investor confidence.
Meanwhile, the British Pound (GBP) continues to receive support thanks to lower bets that the Bank of England (BoE) will cut rates next month. However, the UK's annual inflation rate once again exceeded the central bank's target and accelerated sharply to 2.3% in October, suggesting that the Bank of England will take a cautious approach to cutting interest rates.
Amid expectations that U.S. President-elect Donald Trump's proposed expansionary policies will spur inflation and limit the Fed's ability to cut interest rates further. This should serve as a tailwind for US bond yields, which warrants caution before making bullish bets on GBP/USD.
Trading recommendation: Watch the level of 1.2560, when fixing below consider Sell positions, when rebounding consider Buy positions.
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