03 September 2024, GBP/USD
An event to look out for today:
17:00 GMT+3. USD - ISM Manufacturing Index
GBPUSD:
The GBP/USD pair is trading on a weak note near 1.3120 in the early European session on Tuesday. The major pair's decline is being fuelled by a strengthening US Dollar (USD) ahead of key economic data releases from the US. Bank of England (BoE) Deputy Governor Sarah Breeden will speak later on Tuesday, followed by the release of the US manufacturing Purchasing Managers' Index (PMI) from ISM.
Investors increasingly believe the US Federal Reserve (Fed) will begin easing monetary policy at its upcoming meeting in September, estimating the probability of a 25 basis points (bps) rate cut at nearly 69%, according to CME's FedWatch tool. Fed Chairman Jerome Powell not only said at the annual symposium in Jackson Hole last month that ‘it is time for a policy adjustment.’
More Fed rate cuts could put pressure on the US dollar in the near term. Analysts at Rabobank currently expect four Fed rate cuts between September and January, and then a rate hold until the end of 2025. Friday's US Non-Farm Payrolls (NFP) report will be more significant than usual and could provide some hints on the size and pace of Fed rate cuts. The US economy is expected to have added 163,000 jobs in August and the unemployment rate is expected to have fallen to 4.2%.
On the other hand, markets expect the Bank of England not to cut the rate at the September meeting, while there is an 87.2% chance of a 25bp rate cut at the November meeting. In the absence of crucial economic data from the UK this week, dollar price dynamics will be the main driver for GBP/USD.
Trading recommendation: Trade mainly with buy orders at the price level of 1.3160. We consider sell orders at the price level of 1.3090.
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