The GBP/USD currency pair is struggling to build on modest recovery gains from the previous day, encountering fresh selling pressure during the Asian session on Wednesday. Current trading prices hover around the 1.3080-1.3085 range, remaining close to a nearly four-week low reached on Monday.
The British Pound (GBP) is underperforming as market sentiment grows that the Bank of England (BoE) may accelerate its rate-cutting cycle. This expectation was bolstered by dovish comments from BoE Governor Andrew Bailey last week, indicating the possibility of more aggressive rate cuts if inflation shows further improvement. These developments are exerting downward pressure on the GBP/USD pair.
Conversely, the US Dollar (USD) remains robust, positioned near a seven-week high achieved last week, fueled by reduced expectations for aggressive policy easing from the Federal Reserve (Fed). Current market indicators suggest an over 85% likelihood that the Fed will implement a 25 basis point rate cut in November. Additionally, rising geopolitical tensions in the Middle East and disappointment over China’s recent stimulus efforts are supporting the USD, further weighing on the GBP/USD pair.
This fundamental landscape implies a bearish outlook for spot prices. However, traders may exercise caution and avoid aggressive positions, opting instead to await the release of the Federal Open Market Committee (FOMC) meeting minutes later in the US session. Additionally, upcoming US Consumer Price Index (CPI) and Producer Price Index (PPI) reports later in the week are expected to influence USD dynamics and shape the future direction of the GBP/USD pair.
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