GBP/USD Surges for Second Day as USD Weakens; BoE Rate Cuts and UK Riots Limit Upside Potential
The GBP/USD pair continues to climb higher for the second consecutive day, bouncing back from a five-week low around 1.2665. The momentum is supported by a slight decline in the US Dollar (USD) during the Asian trading session. Dovish expectations from the Federal Reserve, falling US bond yields, and a risk-on sentiment in the market are all contributing to the weakness in the USD.
Despite a positive US labor market report, the USD Index (DXY) is retreating from its weekly high, providing a boost to the GBP/USD pair. The latest jobless claims data from the US Department of Labor showed a better-than-expected figure, easing concerns about a potential economic slowdown. However, the market is still anticipating a rate cut by the Federal Reserve in September, putting pressure on the USD.
While the GBP/USD pair is gaining momentum, the possibility of two more interest rate cuts by the Bank of England (BoE) in 2024 and ongoing riots in the UK are expected to limit the upside potential for the pair. The upcoming release of UK monthly jobs data, consumer inflation figures from both the UK and the US, and the UK GDP data will likely drive the direction of the currency pair in the coming days.
In summary, the GBP/USD pair is on an upward trend due to USD weakness, but concerns about potential BoE rate cuts and domestic unrest in the UK may cap the gains. Investors should pay attention to upcoming economic data releases to gauge the future movement of the currency pair and adjust their investment strategies accordingly.