GBP/USD weakens as Fed and BoE caution, geopolitics bolster US Dollar
GBP/USD trades lower on Tuesday, hovering around 1.3490 at the time of writing, down 0.33% on the day as investors trim positions ahead of key monetary policy decisions from the Federal Reserve (Fed) and the Bank of England (BoE) later this week.
The Pound Sterling (GBP) faces selling pressure amid uncertainty surrounding the BoE policy outlook. The central bank is widely expected to keep its key rate unchanged at 3.75%, with a large majority in favor, as recent UK core inflation data has shown signs of easing. However, policymakers are still likely to highlight upside risks to inflation, particularly due to persistent tensions in global energy markets.
BoE Governor Andrew Bailey recently stated at an International Monetary Fund (IMF) event that there is no urgency to adjust monetary policy, emphasizing the high level of uncertainty surrounding the economic outlook and the transmission of energy shocks to the UK economy.
On the US side, the US Dollar (USD) remains relatively supported, with the US Dollar Index (DXY) edging higher as markets await the Fed decision. The central bank is expected to leave interest rates unchanged in the 3.5%-3.75% range for the fourth consecutive meeting.
According to Deutsche Bank, market expectations for US monetary policy have recently shifted in a more hawkish direction, driven by persistent inflationary pressures linked to rising energy prices. In this context, any hawkish signals from Fed Chair Jerome Powell could further support the Greenback and increase downside pressure on the pair.
Meanwhile, the geopolitical backdrop remains a key driver for markets. Ongoing tensions in the Middle East and disruptions to energy supply continue to weigh on risk sentiment, supporting the US Dollar as a relative safe-haven asset.
In the near term, investors are likely to remain cautious, with volatility expected to increase ahead of the central bank announcements, as markets closely watch forward guidance for clues on the future path of interest rates.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
You may also like
Tesla’s car business keeps shrinking as Wall Street expects another year-over-year sales drop
The apparent boom in US stocks masks underlying weakness! The S&P 500 is less than 2% from its all-time high, yet small-cap stocks, banks, and utilities sectors suffer heavy losses.
As the yield on the U.S. 10-year Treasury once surged to 5.34%, reaching its highest level since 2002, Wall Street is intensely debating when the bond market sell-off will truly impact the seemingly resilient U.S. stock market.
Fed Rate Hike Expectations for October Cool Down! Officials Suggest No Urgent Action Needed, AI Investment Boom May Become Major Inflation Risk Next Year
Several senior Federal Reserve officials have consecutively sent signals this week, suggesting that although U.S. inflation remains high and further rate hikes may be needed in the future, the Federal Reserve is not in a hurry to take action in October.
Anthropic may launch its IPO as early as mid-November with a valuation of up to $2 trillion, aiming to list on the US stock market before Thanksgiving.
According to sources familiar with the matter, artificial intelligence company Anthropic is seeking to launch its initial public offering as early as mid-November and aims to officially enter the US stock market before the Thanksgiving holiday on November 26.
Crypto prices
More
