GBP/USD Hits 30-Month High After Fed Rate Cut
The GBP/USD pair reached a fresh 30-month high on Wednesday, surging close to the 1.3300 mark following the US Federal Reserve’s decision to slash interest rates by a substantial 50 basis points. This move marked the first rate cut by the US central bank in over four years. As investors digest this news, all eyes turn to the upcoming Bank of England (BoE) rate call on Thursday, although no changes are anticipated at this time. Additionally, UK Retail Sales data is set to conclude the week’s economic calendar on Friday.
BoE Rate Decision and Market Expectations
- The BoE is expected to maintain interest rates at 5.0% in a seven-to-two vote.
- Previous rate cuts earlier this summer suggest the BoE will likely keep rates steady in this meeting.
The Fed’s recent Summary of Economic Projections revealed a downward revision in the central bank’s rate outlook. The median policy expectations now indicate a Fed Funds rate of 4.4% by the end of 2024 and 3.4% by the end of 2025, down from previous estimates of 5.1% and 4.1%, respectively. Moreover, the Fed’s GDP growth projection for the US has been adjusted to a flat 2.0% through 2024, with the Unemployment Rate expected to settle around 4.4% by the end of the same period.
Fed Chair Jerome Powell’s calming remarks during the post-rate cut press conference helped stabilize market sentiment. Powell emphasized the Fed’s data-dependent approach and hinted at a wait-and-see stance before any further rate adjustments. Market participants are currently pricing in a 65% probability of no additional rate cuts at the next FOMC meeting on November 7.
GBP/USD Price Forecast
Despite hitting a 30-month high near 1.3300, GBP/USD retraced some gains to trade around the 1.3200 level. The pair’s upward momentum remains intact, with the 50-day Exponential Moving Average (EMA) acting as a support level near 1.3000.
Pound Sterling FAQs
Here are some frequently asked questions about the Pound Sterling:
What Influences the Value of the Pound Sterling?
- Monetary policy decisions by the Bank of England play a crucial role in determining the Pound’s value.
- Economic indicators such as GDP, PMIs, and employment data can impact the direction of GBP.
- The Trade Balance, which measures a country’s exports and imports, also affects the Pound’s strength.
Understanding these factors can provide insights into the dynamics of the currency market and how they influence the value of the Pound Sterling.