The GBP/USD pair is currently trading with a slight downward bias during the Asian session, but remains close to a one-year peak reached the previous day. The pair is hovering around the key psychological level of 1.3000 and seems set to continue its recent uptrend over the past few weeks. The US Dollar has been helped by a rise in US Treasury bond yields, which has led to a partial recovery from heavy losses the day before. However, the expectation that the Federal Reserve will begin cutting rates in September, along with the overall positive tone of global equity markets, may limit the Greenback’s gains.
Recently, GBP/USD has surpassed the 1.3000 level as hopes for a rate cut from the Federal Reserve in September have increased. The dovish comments from Fed officials have been well received by the market, with investors anticipating progress on inflation measures. The upcoming rate decision from the European Central Bank may also impact Cable traders. Rate markets have fully priced in a rate cut in September, with a high probability of three cuts by 2024, compared to the Fed’s own projections of one or two cuts. The FedWatch Tool indicates a 98% chance of a rate cut in September.
Looking ahead, traders will be closely monitoring any developments related to the Fed’s rate decision in September and any announcements from central banks, such as the European Central Bank. The recent strength of the GBP/USD pair may be tested by potential headwinds, such as a stronger US Dollar, geopolitical tensions, or disappointing economic data. However, the overall market sentiment remains positive, with investors favoring riskier assets, which could limit the downside potential for the pair.
In conclusion, the GBP/USD pair is currently trading with a cautious tone as the overbought RSI and a rise in US Treasury bond yields have led to a slight pullback. The pair remains near a one-year peak and is expected to continue its recent uptrend. Market sentiment is largely driven by expectations of a rate cut from the Federal Reserve in September, which has favored the Pound Sterling against the US Dollar. Traders will be monitoring upcoming central bank decisions and economic data releases for further clues on the future direction of the GBP/USD pair.
