On Tuesday, GBP/USD backslid nearly a full percent as the Pound Sterling continues to weaken against the broader FX market. The US Dollar, on the other hand, found some relief as markets shift back into a risk-on stance driven by hopes for a September rate cut from the Federal Reserve (Fed). Despite this, the rapidly depreciating GBP pushed Cable to fresh five-week lows just below 1.2700.
Forex Today: Markets’ Focus on Data and Rate Cut Expectations
With a thin economic calendar for both currencies on Wednesday, investors are eagerly awaiting any structural changes in the market dynamics.
The recent interest rate cut by the Bank of England (BoE) from 5.25% to 5.0% has contributed to the decline in the Pound Sterling, prompting investors to reevaluate their bullish positions on the currency. Social unrest in the UK has added to the uncertainty, leading investors to question the economic outlook for the country and speculate on further rate cuts by the BoE in 2024.
Market expectations have fully priced in a September rate cut by the Fed, with odds favoring a double cut of 50 basis points during the upcoming rate call on September 18. Looking ahead, there is little certainty of the Fed maintaining steady rates in 2024, with predictions of four quarter-point cuts by the end of the year.
GBP/USD Technical Analysis
Tuesday’s 0.9% decline in Cable has brought the pair closer to the 200-day Exponential Moving Average (EMA) at 1.2646, marking the first time since May that it has approached this long-term moving average. With a 3% drop from its peak in July, GBP/USD may continue its downward trend towards 2024 lows of 1.2300 if it falls below 1.2600.