The GBP/USD pair is trading higher at approximately 1.3215 during the early Asian session on Monday, buoyed by expectations of a forthcoming easing of US monetary policy. The US dollar has weakened in response to indications from the Federal Reserve (Fed) that it will initiate rate cuts in September, providing support to the GBP/USD pair.
At the Jackson Hole symposium on Friday, Fed Chair Jerome Powell suggested that the Federal Open Market Committee (FOMC) is poised to lower the target range for the Federal Funds Rate at its September 17-18 meeting. Powell emphasized that inflation is progressing towards the 2% target, but refrained from specifying the magnitude of the rate cut or the pace of future cuts, citing a data-dependent approach.
The prospect of Fed rate cuts has put downward pressure on the Greenback, benefiting the GBP/USD pair. Analysts at Rabobank anticipate that the US labor market may deteriorate further, potentially prompting four successive rate cuts of 25 basis points each in September, November, December, and January.
Conversely, the Pound Sterling (GBP) receives some support from speculation that the Bank of England’s (BoE) easing cycle will be more gradual compared to other major central banks. BoE Governor Andrew Bailey remarked late Friday that inflation remains a critical concern, despite some easing of pricing pressures. Bailey cautioned against declaring an end to inflationary challenges at this stage.
Market participants are also awaiting the release of US Durable Goods Orders for July later on Monday, which could provide further insights into economic conditions and influence currency movements.
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