Skip to content GBPUSD Fundamental Analysis – 17-October-2024
The British pound has dipped below $1.3 for the first time since August 19th due to unexpectedly low inflation rates in the U.K. This significant drop supports the likelihood of further interest rate reductions by the Bank of England.
The annual inflation slowed to 1.7%, marking its lowest since April 2021 and falling short of the predicted 1.9%. Additionally, core inflation decreased to 3.2% from 3.6%, and services inflation reached a new low of 4.9% since May 2022.
The GBP/USD 4-hour chart below demonstrates the price, support, and resistance levels.
Slowing Wage Growth Signals Economic Shift
Wage increases are also losing momentum, reaching the lowest point in two years. This trend suggests the pressure from rising wages within the economy is easing.
With these developments, investors are now expecting a more substantial rate cut from the Bank of England, potentially around 45 basis points by the end of the year, increased from the initially expected 37 basis points.
Anticipation Builds for BoE’s Next Move
The Bank of England is projected to reduce borrowing costs by 25 basis points in the upcoming month. This anticipated decision draws considerable attention, especially with the 2025 Budget announcement on the horizon, which will provide further insights into the government’s future policy and tax directions.
Strong Dollar Influences Pound’s Decline
The robust performance of the U.S. dollar has contributed to the pound’s decline. Expectations that the Federal Reserve will slow down the pace of rate cuts more than previously thought have also played a significant role in the currency’s movement.
This shift in the monetary policy outlook between the two banks affects the pound’s strength against the dollar.
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