The GBP/USD currency pair has built on recent gains, climbing to its highest level since March 2022, reaching around 1.3430 during the Asian session on Wednesday. The current fundamental landscape suggests that the path of least resistance for the pair favors upward movement, although slightly overbought conditions may warrant caution among bullish traders.
Support for the British Pound (GBP) stems from expectations that the Bank of England‘s (BoE) rate-cutting cycle will proceed at a slower pace compared to the United States. BoE Governor Andrew Bailey stated on Tuesday that while interest rates are expected to decline, this process will be gradual, with rates unlikely to return to ultra-low levels without significant economic shocks. Conversely, the market anticipates a more aggressive policy easing from the Federal Reserve (Fed), which has contributed to a subdued US Dollar (USD), benefiting the GBP/USD pair.
According to the CME Group’s FedWatch Tool, there is currently over a 75% probability that the Federal Reserve will implement a 50 basis point rate cut in November. This, coupled with weaker US macroeconomic data released on Tuesday and a prevailing risk-on environment, continues to put pressure on the safe-haven dollar, supporting a positive outlook for the GBP/USD pair. However, the Relative Strength Index (RSI) on the daily chart has exceeded the 70 mark, suggesting the need for near-term consolidation or a modest pullback before any further upward movements.
Looking ahead, there are no major economic data releases expected from the UK on Wednesday. However, a scheduled speech by BoE Monetary Policy Committee Member Megan Greene may influence the GBP and provide momentum for the GBP/USD pair. Additionally, New Home Sales data from the US could create short-term trading opportunities during the early North American session. Traders may exercise caution and avoid aggressive positions ahead of significant speeches from influential Federal Open Market Committee (FOMC) members this week, including Fed Chair Jerome Powell on Thursday, as well as the release of the US PCE Price Index on Friday.
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