The Pound Sterling Hits a Fresh Four-Month Low Against the US Dollar
- Market Impact: The Pound Sterling (GBP) has dropped to a new low near 1.2630 against the US Dollar (USD) following news of Trump’s control over both US houses.
- US Economic Outlook: Optimism surrounding the US economic outlook has boosted the USD, fueled by Trump’s protectionist and expansionary policies.
- Fed Rate Cut: Expectations of a December interest rate cut by the Federal Reserve (Fed) remain high due to the potential impact of Trump’s policies.
The Pound Sterling has reached a four-month low near 1.2630 against the US Dollar as the USD continues to strengthen on news that President-elected Donald Trump and the Republican Party will have control over both the US Senate and the House of Representatives. This development is expected to allow Trump to implement his policies without interruption, including raising import tariffs and lowering taxes on corporations and workers.
Market participants anticipate that these policies could lead to higher inflation, limiting the Fed’s ability to cut interest rates significantly. A 25 basis points interest rate cut is expected in December, with market expectations rising after recent data showed an increase in inflationary pressures.
Fed Chair Powell and BoE Governor Bailey’s Speeches Awaited
Investors are awaiting speeches by Fed Chair Jerome Powell and Bank of England (BoE) Governor Andrew Bailey for further insight into interest rate decisions and the impact of Trump’s policies on the economy.
- US Economic Data: Lower Initial Jobless Claims and a higher-than-expected Producer Price Index are expected to strengthen the USD further.
- BoE Decision: Bailey’s speech is crucial for understanding potential interest rate cuts in the UK and the impact of global policies on the economy.
Pound Sterling Faces Pressure Ahead of BoE Bailey’s Speech
- Market Performance: The Pound Sterling is weak against major peers, particularly the USD, ahead of Bailey’s speech.
- BoE’s Stance: Recent comments by BoE officials suggest a cautious approach to interest rate decisions amidst inflationary concerns.
- Inflation Outlook: Bailey’s speech will provide insights into the inflation outlook, especially in the services sector.
Technical Analysis: Support for Pound Sterling at 1.2600
The Pound Sterling is experiencing a downward trend against the USD, with key support levels at 1.2600. The 200-day EMA is acting as resistance for any potential upside movement.
Overall, the Pound Sterling’s performance is influenced by global economic policies and central bank decisions, making it essential for investors to stay informed and vigilant in their trading strategies.