The Pound Sterling (GBP) is facing a tough time against its major peers, especially the US Dollar, as market speculation grows for the Bank of England (BoE) to announce a rate cut in its upcoming meeting on Thursday. Traders are betting on a 25 basis points (bps) reduction in the key borrowing rates, with over 58% chance according to Reuters.
Despite stubbornly high UK service inflation, investors believe that the BoE will have a tough decision to make, with a possible 5-4 vote split on the rate-cut. UK’s service inflation remained at 5.7% in June, higher than the bank’s forecast of 5.1%.
On the other hand, the Federal Reserve (Fed) is expected to maintain its interest rates but deliver a dovish guidance, which could impact the US Dollar. Investors will closely watch Fed Chair Jerome Powell’s press conference for any hints on future rate cuts.
Overall, the Pound Sterling’s performance will be influenced by the outcome of the BoE meeting and the Fed’s stance on interest rates. Economic data releases this week will also play a role in shaping the currency’s movement.
Analysis and Breakdown:
In simple terms, the Pound Sterling is struggling against the US Dollar due to expectations of a rate cut by the Bank of England. This decision, along with the Fed’s policy stance, will determine the future direction of both currencies. Investors need to monitor the central banks’ decisions and economic data releases to make informed decisions about their investments and financial strategies.