GBP/USD Outlook: BoE Rate Cut Expected
- GBP/USD may face challenges as the BoE is widely expected to deliver a 25 basis point rate cut in November.
- BoE Deputy Governor Sarah Breeden may participate in a panel discussion on financial regulation in Washington on Wednesday.
- Fed’s Daly stated that the economy is evidently in a stronger position, with a significant decline in inflation.
The GBP/USD pair is making its way towards 1.3000 during Asian trading on Wednesday. However, the Pound Sterling (GBP) is encountering obstacles due to decreasing consumer and producer inflation figures, along with weak labor market data in the United Kingdom (UK). These factors are raising expectations of a 25 basis point rate cut by the Bank of England (BoE) in November, followed by another cut in December.
BoE’s Focus on Financial Regulation
BoE Governor Andrew Bailey emphasized the necessity for the UK central bank to enhance its monitoring capabilities in the less transparent non-banking system. Speaking at a Bloomberg event in New York, Bailey highlighted the importance of pivoting from rule-making to surveillance to better track financial activities outside the traditional banking sector.
Upcoming Panel Discussion on Financial Regulation
BoE Deputy Governor Sarah Breeden is set to participate in a panel discussion on financial regulation, organized by the Institute of International Finance (IIF) in Washington on Wednesday.
US Dollar Strengthens
The US Dollar (USD) is gaining ground as Treasury yields increase due to the growing likelihood of nominal rate cuts by the Federal Reserve (Fed). The US Dollar Index (DXY), tracking the USD against six major currencies, is near a two-month high at 104.20. Moreover, yields on 2-year and 10-year US Treasury bonds are at 4.05% and 4.23%, respectively.
Fed’s Perspective on the Economy
Federal Reserve Bank of San Francisco President Mary Daly mentioned on social media that the economy is in a stronger position, with a significant decrease in inflation and a more sustainable path for the labor market.
Pound Sterling FAQs
The Basics of Pound Sterling
The Pound Sterling (GBP) is the oldest currency globally, dating back to 886 AD, and is the official currency of the United Kingdom. It accounts for 12% of all foreign exchange transactions, averaging $630 billion daily. Key trading pairs include GBP/USD (‘Cable’), GBP/JPY (‘Dragon’), and EUR/GBP. The Pound Sterling is issued by the Bank of England (BoE).
Factors Influencing GBP Value
Monetary policy decisions by the BoE significantly impact the value of Pound Sterling. The BoE adjusts interest rates based on achieving stable inflation around 2%. Economic indicators like GDP, PMIs, and employment data also influence GBP value. Additionally, the Trade Balance, measuring exports and imports, affects the strength of the Pound Sterling.