GBPUSD Sets 2+ Year Highs as the Fed Out-Cuts its UK Peer
The pair gains nearly 5% this year and the latest round of policy decisions by the Fed and the BoE, sent it the highest levels since the first quarter of 2022. The US Fed on Wednesday made its belated pivot with an outsized 0.5% reduction and pointed to another 50 bps worth of cuts by the end of the year. The Bank of England started lowering rates earlier than its US counterpart, with the 0.25% cut of August. Still wary over price pressures though, it has maintained a cautious stance around further easing. This apprehension was reaffirmed on Thursday, as policymakers stood pat on rates.
The Fed out-cut the BoE and is on track to deliver more reductions, setting up a favorable monetary policy differential for GBP/USD. Bulls now have the opportunity to push for the 1.3483 handle, but we are cautious at this time for further strength.
The Fed may have pointed to steep rate cut path as it tries to ensure a strong labor market and a soft landing, but may have a hard time implementing it, as it could put upward pressure to prices. On the other hand, despite the BoE’s trepidation, pressure could mount for faster pace and two more cuts are not unreasonable. Furthermore, the RSI moves towards overbought conditions, so we could see pressure. Daily closes below the EMA200 (black line) would be needed for the bullish bias to pause, but that is hard to justify under current monetary policy dynamics.
Stratos Markets Limited (fxcm.com/uk):
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Any opinions, news, research, analyses, prices, other information, or links to third-party sites contained on this video are provided on an "as-is" basis, as general market commentary and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is therefore not subject to any prohibition on dealing ahead of dissemination. Although this commentary is not produced by an independent source, FXCM takes all sufficient steps to eliminate or prevent any conflicts of interests arising out of the production and dissemination of this communication. The employees of FXCM commit to acting in the clients' best interests and represent their views without misleading, deceiving, or otherwise impairing the clients' ability to make informed investment decisions. For more information about the FXCM's internal organizational and administrative arrangements for the prevention of conflicts, please refer to the Firms' Managing Conflicts Policy. Please ensure that you read and understand our Full Disclaimer and Liability provision concerning the foregoing Information, which can be accessed via FXCM`s website:
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The Fed out-cut the BoE and is on track to deliver more reductions, setting up a favorable monetary policy differential for GBP/USD. Bulls now have the opportunity to push for the 1.3483 handle, but we are cautious at this time for further strength.
The Fed may have pointed to steep rate cut path as it tries to ensure a strong labor market and a soft landing, but may have a hard time implementing it, as it could put upward pressure to prices. On the other hand, despite the BoE’s trepidation, pressure could mount for faster pace and two more cuts are not unreasonable. Furthermore, the RSI moves towards overbought conditions, so we could see pressure. Daily closes below the EMA200 (black line) would be needed for the bullish bias to pause, but that is hard to justify under current monetary policy dynamics.
Stratos Markets Limited (fxcm.com/uk):
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 62% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Stratos Europe Ltd (trading as “FXCM” or “FXCM EU”) (fxcm.com/eu):
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 59% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Stratos Trading Pty. Limited (fxcm.com/au):
Trading FX/CFDs carries significant risks. FXCM AU (AFSL 309763). Please read the Financial Services Guide, Product Disclosure Statement, Target Market Determination and Terms of Business at fxcm.com/au
Stratos Global LLC (fxcm.com/markets):
Losses can exceed deposits.
Any opinions, news, research, analyses, prices, other information, or links to third-party sites contained on this video are provided on an "as-is" basis, as general market commentary and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is therefore not subject to any prohibition on dealing ahead of dissemination. Although this commentary is not produced by an independent source, FXCM takes all sufficient steps to eliminate or prevent any conflicts of interests arising out of the production and dissemination of this communication. The employees of FXCM commit to acting in the clients' best interests and represent their views without misleading, deceiving, or otherwise impairing the clients' ability to make informed investment decisions. For more information about the FXCM's internal organizational and administrative arrangements for the prevention of conflicts, please refer to the Firms' Managing Conflicts Policy. Please ensure that you read and understand our Full Disclaimer and Liability provision concerning the foregoing Information, which can be accessed via FXCM`s website:
Stratos Markets Limited clients please see: fxcm.com/uk/market-commentary/
Stratos Europe Ltd clients please see: fxcm.com/eu/market-commentary/
Stratos Trading Pty. Limited clients please see: fxcm.com/au/market-commentary/
Stratos Global LLC clients please see: fxcm.com/markets/market-commentary/
Past Performance is not an indicator of future results.
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