18 December 2024, GBP/USD
Events to pay attention to today:
09:00 EET. GBP - Consumer Price Index
21:00 EET. USD - FOMC Rate Decision
GBPUSD:
On Tuesday, GBP/USD commenced a two-day winning streak, gaining one-fifth of a cent to reach 1.2700. However, this gain was short-lived. Cable is recouping last week's losses and returning to the mean in the near term as traders prepare for a series of year-end events, including Federal Reserve (Fed) and Bank of England (BoE) meetings, as well as the latest UK Consumer Price Index (CPI) inflation data.
On Tuesday, US retail sales data showed a 0.7% increase from the previous month, prompting some investors to question the necessity of an aggressive rate-cutting strategy, particularly in light of the recent uptick in inflation figures. Nevertheless, market expectations remain aligned with the possibility of a third consecutive Federal Reserve interest rate cut on Wednesday. According to CME's FedWatch tool, the likelihood of a 25-basis-point reduction is 95%.
UK CPI inflation is forecast to decline to 0.1% m/m in November, following October's 0.6% increase. However, core inflation remains strong, with core CPI inflation expected to come in at 3.6% in November, down from 3.3% in the previous period. Following the release of CPI data on Wednesday, the Bank of England will hold its final 2024 rate meeting on Thursday. Overall forecasts are that the Bank of England will vote eight to one in favour of keeping the main discount rate unchanged until the end of the year.
Trading recommendation: We are watching the level of 1.2700, trading mainly with Buy orders.
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