Skip to content GBPUSD Hits One-Month Low on Dovish BoE
The British pound dropped to its lowest level in a month, falling under $1.31. This decline is mainly due to expectations that the U.S. Federal Reserve might not ease its policy as much as previously thought.
This contrasts sharply with the Bank of England’s (BoE) current stance, which leans more towards reducing interest rates.
BoE’s Changing Tactics
Andrew Bailey, the Bank of England governor, has indicated a move towards a more aggressive and bold strategy in lowering rates.
However, the BoE’s Chief Economist, Huw Pill, has backed a more restrained approach. Traders and investors generally anticipate that the BoE may stop reducing rates when they reach about 3.5%, which is 1.5% lower than they are now.
U.K. Fiscal Future Under Scrutiny
Investors also closely watch the U.K.’s fiscal situation, especially with the new government. There is growing concern over how the Labour Party’s proposed budget cuts and tax increases might affect economic growth. These fiscal policies are expected to be detailed in the next year’s budget.
Impact of U.S. Economic Indicators
The U.S. economy showed a robust jobs report on the other side of the pond, strengthening the dollar. This development puts additional pressure on the GBP/USD currency pair, especially as investors await the upcoming U.S. Consumer Price Index (CPI) report. This key indicator could provide more clues on the future direction of U.S. monetary policy.
GBP/USD Analysis – 10-October-2024
The British pound trades in a bear market against the U.S. dollar at approximately $1.305. The downtrend eased when the price dipped to as low as $1.30, the September 11 low. Furthermore, the Awesome oscillator histogram is red and below the signal line, indicating the bear market prevails.
From a technical standpoint, the downtrend will likely resume if the GBP/USD price dips below the $1.30 resistance. If this scenario unfolds, the next bearish target could be the June 12 high at $1.286.
Please note that the bearish outlook should be invalidated if the GBP/USD value exceeds the October 4 high at $1.317.
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