The GBP/USD pair is extending its losses for the third consecutive session, trading around 1.2580 during the Asian hours on Friday. The decline is primarily driven by a stronger US Dollar (USD), as traders assess the Federal Reserve’s (Fed) monetary policy outlook following a surprising drop in US Initial Jobless Claims.
The US Dollar Index (DXY), which tracks the USD against a basket of major currencies, is trading near 107.00, just shy of its yearly high of 107.15 reached on Thursday. The Dollar strengthened following the release of last week’s Initial Jobless Claims data, which showed a decline to 213,000 for the week ending November 15, down from a revised 219,000 (previously 217,000) in the prior week and below the expected 220,000. This better-than-expected data has stoked speculation that the pace of Federal Reserve rate cuts could slow.
According to data from the CME FedWatch Tool, futures traders now see a 57.8% chance of a 25 basis point rate cut in December, down from 72.2% a week earlier.
In contrast, the UK economy shows signs of improvement, with the GfK Consumer Confidence Index rising by 3 points to -18 in November, its first increase in three months. This uptick is attributed to lower interest rates, rising wages, and reduced concerns about tax hikes.
Looking ahead, traders will closely monitor the release of S&P Global Purchasing Managers’ Index (PMI) data for both the UK and the US on Friday. Additionally, UK Retail Sales figures for October and the final Michigan Consumer Sentiment report will provide further insights into the economic outlook and influence market sentiment.
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