Skip to content GBPUSD Fundamental Analysis – 30-August-2024
The British pound trades around $1.318 (GBP/USD), marking its highest point over two years. August has been a solid month, with the pound expected to gain 3.2%—its best performance since November 2023.
This recent surge in the pound’s value is mainly due to different monetary policies in the UK and the U.S.
Diverging Monetary Policies: A Key Factor
In the U.S., the economic data has been weaker than expected, leading to hints from Federal Reserve Chair Jerome Powell that interest rates might be cut soon. This has caused the U.S. dollar to weaken.
On the other hand, the UK has shown more robust economic results, and the Bank of England (BoE) has been careful about making further cuts to interest rates, strengthening the pound.
BoE’s Approach: Caution with Rate Cuts
The Bank of England recently lowered its primary interest rate to 5%. Traders believe additional cuts of about 41 basis points could occur before the end of the year.
However, these cuts are expected to be more measured than the U.S., where the Federal Reserve might lower rates by 103 basis points this year. There is even talk of a possible 50 basis point cut as early as next month.
UK’s Economic Outlook: A Word of Caution
Despite the pound’s current strength, UK Prime Minister Keir Starmer has warned that the country might face a slow economic recovery. This suggests that while the pound is strong now, there may be challenges ahead for the UK economy.
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