WTI consolidates its recovery gains registered over the past two days amid mixed cues. Concerns about slowing demand in China and the US cap the upside for Crude Oil prices. Dovish Fed-inspired broad-based USD weakness offers support and helps limit losses. Import Price Index and Export Price Index data for July will be featured in the US economic docket.
The pair is also called ‘The Cable’, referring to the first Transatlantic cable that was crossing the Atlantic Ocean in order to connect Great Britain with the United States of America. This term originated in the mid-19th century, which makes it one of the oldest currency pairs. According to the CME FedWatch Tool, markets are currently pricing in a stronger-than-40% probability of a 50 basis points Federal Reserve (Fed) rate cut at next week’s policy meeting, up from about 20% earlier in the week. The European Central Bank also has influence on the cable due to the importance of business and trade between the UE and the UK.
- If rates remain unchanged, attention turns to the tone of the FOMC (Federal Open Market Committee) statement, and whether the tone is hawkish, or dovish over future developments of inflation.
- The Sterling is one of the four most liquid currencies in Forex and one of the reasons is the highly developed capital market.
- The US Central bank, the Federal Reserve of the United States, is also closely related to the pair.
- When sentiment is not at extremes, traders get actionable price targets to trade upon.
- He’s well-known for his day trading reviews and multiple timeframe analysis.
- However, deteriorating economic performance prompted money markets to begin pricing in four 25 bps rate cuts starting from the summer, anticipating the key rate to be slashed from 5.25% to as low as 4.25% by the end of 2024.
Any assessment of possible scenarios linked to a macroeconomic decision taken by the ECB has impact on the commercial partners of the Eurozone. The Euro is the second reference currency in the world (after the US Dollar) and any move by its central bank, the ECB, has consequences on the assessment of its partners. The US Central bank, the Federal Reserve of the United States, is also closely related to the pair. Inside that institution, the Board of Governors (also known as the Federal Reserve Board) is carefully observed.
When there is a deviation between actual market rate and value reflected in predicted rate, there is usually an opportunity to enter the market. The European Central Bank is expected to cut key rates by 25 bps at the September policy meeting. ECB President Christine Lagarde’s presser and updated economic forecasts will be closely scrutinized for fresh policy cues. Together with the close price, this chart displays the minimum and maximum forecast prices collected among individual participants. The result is a price corridor, usually enveloping the weekly close price from above and below, and serves as a measure of volatility. The GBP/USD (or Pound / Dollar) currency pair belongs to the group of ‘Majors’, a way to mention the most important pairs in the world.
ActionForex.com was set up back in 2004 with the aim to provide insightful analysis to forex traders, serving the trading community for over a decade. Empowering the individual traders was, is, and will always be our motto going forward. This graph is available for each time horizon (1 week, 1 month, 1 quarter). We also indicate the average price prediction as well as the average bias. A general election is expected next year in the US and the UK, which could fuel intense volatility around the GBP/USD pair.
USD/JPY recovers a few pips after refreshing YTD low, remains heavily offered below 141.00
The board meets several times per year and announces the interest rates. If rates remain unchanged, attention turns to the tone of the FOMC (Federal Open Market Committee) statement, and whether the tone is hawkish, or dovish over future developments of inflation. In the GBPUSD Price Forecast 2024, our analyst, Dhwani Mehta, notes there are plenty of unknowns and looming uncertainties that make it difficult to convincingly predict the course of the Pound Sterling against the USD in the year ahead. Bouts of volatility (or extreme flat volatility) can be then compared to the typical outcome expressed through the averages.
The Bank of England (BoE)
The Forecast Poll is a sentiment tool that highlights near and medium-term price expectations from leading market experts. It is a sentiment indicator which delivers actionable price levels, not merely “mood” or “positioning” indications. Traders can check if there is unanimity among the surveyed experts – if there is excessive speculator sentiment driving a market – or if there are divergences among them. When sentiment is not at extremes, traders get actionable price targets to trade upon.
European Central Bank widely expected to cut interest rates in September
Later in the session, the University of Michigan will release the preliminary Consumer Sentiment Survey for September. Meanwhile, US stock index futures trade marginally higher on the day. In case risk flows continue to dominate the action in the American session, GBP/USD could inch higher heading into the weekend.
Amidst looming inflation and growth concerns, the political developments on both sides of the Atlantic are likely to be closely followed. Softer-than-forecast producer inflation data made it difficult for the USD to stay resilient against its major rivals. The US bureau of Labor Statistics (BLS) reported that the Producer Price Index rose 1.7% in August, down from 2.1% in July and below analysts’ estimate of 1.8%.
US – Fed preview: Dovish 25bp
The pound had a bearish week, fluctuating amid mixed US economic data. In this chart, the close price is shifted behind so it corresponds to the date when the price for that week was forecasted. This enables the comparison between the average forecast price and the beaxy exchange review effective close price. USD/JPY remains under some selling pressure on Friday and hits a fresh YTD low. The divergent Fed-BoJ policy expectations continue to weigh heavily on the pair.
Meanwhile, the US will release consumer and producer inflation data. The pound has benefitted in recent weeks due to expectations for fewer rate cuts in the UK compared to the US. Meanwhile, US inflation data will be the last major report before the Fed’s policy meeting. Softer-than-expected figures will increase the likelihood of a 50-bps rate questrade forex cut.
Investors look to Fed and BoJ meetings next week for a fresh directional impetus. Although the price chops through the 22-SMA, it has maintained an upward trajectory. At the same time, the RSI has traded mostly above 50, supporting solid bullish momentum. Saqib Iqbal is a market analyst, prop fund trader and mentor, serving the industry with his analysis and educational content since 2011.