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by At the beginning of September, the British pound stood at around $1.315 (GBP/USD), building on a 2.1% rise in August. This increase can be linked to the different monetary strategies of the US and the UK, which are boosting the pound’s value.
GBPUSD Fundamental Analysis – 5-September-2023
US Dollar Weakened by Economic Uncertainty
In the US, weak economic reports and signals from Federal Reserve Chair Jerome Powell about possible rate cuts have pressured the dollar. The expectation of lower interest rates in the US has reduced the dollar’s strength, making the pound more attractive.
Bank of England’s Cautious Approach
On the other hand, the UK has seen more robust economic data, and the Bank of England (BoE) has been careful about making further rate cuts.
Recently, the BoE lowered its primary interest rate to 5%, but it is taking a slower approach than the US. Investors believe the BoE might cut rates by 41 basis points by the end of the year.
Fed’s More Aggressive Rate Cuts Expected
In contrast, the US Federal Reserve is expected to cut rates more aggressively, with a total reduction of 103 basis points predicted for the year.
Some speculate that the Fed could even introduce a 50 basis point cut in the coming weeks, adding to the difference in strategies between the two central banks. This difference gives the British pound an edge over the US dollar in the current market.
By explaining these shifts in both economies and their impacts, the British pound’s growth becomes more apparent, with the divergence in monetary policy playing a pivotal role.
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