The Pound Sterling has recently faced some fluctuations against the US Dollar, posting a fresh two-week low near 1.2810. This was mainly due to uncertainty surrounding the upcoming Federal Reserve monetary policy announcement. The Fed is expected to keep interest rates unchanged, with all eyes on the statement and press conference by Fed Chair Jerome Powell. Market participants are eager to know if the Fed will consider rate cuts this year, potentially starting at the September meeting.
Despite market expectations for rate cuts, Bank of America economists have suggested that cooling consumer demand and inflation may not be happening quickly enough to warrant as much policy easing. They believe that rate cuts may start in December, but upcoming data could influence an earlier decision. Besides the Fed policy, investors will also keep a close watch on various US economic indicators such as job openings, employment changes, and manufacturing PMI.
The Pound Sterling has rebounded against its major peers, except the US Dollar, ahead of the Bank of England (BoE) monetary policy meeting. The BoE is expected to cut interest rates by 25 basis points to 5%, marking the first rate cut in over four years. High inflation in the service sector remains a concern, but the economic outlook has improved with Prime Minister Keir Starmer’s majority in Parliament. This could lead to a rise in input prices and contribute to renewed price pressures.
In terms of technical analysis, the Pound Sterling remains steady above 1.2800, but has declined towards the lower boundary of a rising channel chart pattern. The GBP/USD pair is below the crucial support level of 1.2900, indicating uncertainty in the near-term trend. The 14-day RSI is declining towards 40.00, potentially serving as a support level for momentum. The 1.2800 support zone is crucial for Pound Sterling bulls, while resistance is seen around 1.3140.
The upcoming Bank of England interest rate decision will have major implications for the Pound Sterling. A hawkish outlook with raised interest rates would be bullish for the GBP, while a dovish view with unchanged or reduced rates would be bearish. The rate decision is scheduled for August 1st, with all eyes on how the BoE views the inflationary outlook for the UK economy. This irregularly released data has the potential to significantly impact the value of the Pound Sterling.
