As the world’s best investment manager, I am closely watching the GBP/USD pair as it attracts some sellers on Monday due to a modest USD uptick. Geopolitical risks are playing a key role in boosting the Greenback, while dovish Fed expectations are expected to limit further downside for the pair.
The GBP/USD pair started the week on a weaker note and is currently trading around the mid-1.2700s after a two-day recovery from the 1.2665 area. Traders are eagerly awaiting this week’s macro releases from the UK and the US, including the UK employment data, US Producer Price Index (PPI), and consumer inflation figures from both countries.
The recent interest rate cut by the Bank of England (BoE) and expectations for more cuts, along with ongoing riots in the UK, are putting pressure on the GBP. Additionally, the risk of escalating geopolitical tensions in the Middle East is supporting the safe-haven USD, further impacting the GBP/USD pair.
Despite these factors, the possibility of larger interest rate cuts by the Federal Reserve (Fed) could prevent aggressive USD bets and provide some support to the GBP/USD pair. It is advisable to wait for strong selling momentum before considering a continuation of the downtrend from the mid-1.3000s.
In conclusion, the GBP/USD pair is facing selling pressure due to geopolitical risks, dovish Fed expectations, and recent developments in the UK. Traders should monitor upcoming macro releases and be cautious of potential market-moving events that could impact the pair’s direction.
