GBP/USD drops amid increasing rate cut expectations by the BoE

Source Fxstreet
Apr 22, 2024 17:48
  • GBP/USD declines following dovish signals from Bank of England officials, with traders eyeing potential August rate cut.
  • Strong US manufacturing data and a less dovish stance from the Federal Reserve boost the Greenback.
  • Upcoming PMIs in the UK and US could further influence the currency pair.

The Pound Sterling lost ground against the US Dollar and dropped to its lowest level since November last year as investors began to price in a more dovish Bank of England. A scarce economic docket in the UK, left GBP/USD traders adrift to market mood and dynamics linked to the buck. Therefore, the pair trades at 1.2350, down 0.12%.

GBP/USD falls to 1.2350 amid speculation of BoE’s faster rate cuts

Last week, Bank of England Governor Andrew Baily said that inflation is edging lower and might warrant a rate cut. On Friday, BoE Deputy Governor Dave Ramsden shifted slightly dovish, saying that he expects incoming data to accentuate the economy's slowdown.

The swaps markets suggest the Bank of England might cut rates in August, with odds standing at 95.9%.

Across the pond, manufacturing activity in the United States (US) gathers steam, as revealed by the Chicago Federal Reserve. The Chicago Fed National Activity Index (CFNAI) rose to 0.15 in March from 0.09 in February. The index’s three-month moving average increased from -0.28 in February to -0.19 in March.

That, along with the hawkish tilt adopted by Federal Reserve Chair Jerome Powell, increased the odds of a less dovish Fed. Market participants expect fewer rate cuts than the Fed's March Summary of Economic Projections (SEP) projection.

Chicago Board of Trader (CBOT) data depicts the Fed could begin to ease policy until September 2024, a month after the BoE. That would keep the GBP/USD downward pressured, as the interest rate differential favors the Fed.

What’s ahead for the GBP/USD?

Ahead of the week, the UK economic docket will feature PMIs. In the US, Fed officials began its blackout period ahead of the May 1 meeting. However, April PMIs and housing data will be released by S&P Global.

GBP/USD

Overview
Today last price 1.2352
Today Daily Change -0.0021
Today Daily Change % -0.17
Today daily open 1.2373
 
Trends
Daily SMA20 1.2561
Daily SMA50 1.2638
Daily SMA100 1.2657
Daily SMA200 1.2569
 
Levels
Previous Daily High 1.2468
Previous Daily Low 1.2367
Previous Weekly High 1.2499
Previous Weekly Low 1.2367
Previous Monthly High 1.2894
Previous Monthly Low 1.2575
Daily Fibonacci 38.2% 1.2406
Daily Fibonacci 61.8% 1.243
Daily Pivot Point S1 1.2337
Daily Pivot Point S2 1.2301
Daily Pivot Point S3 1.2236
Daily Pivot Point R1 1.2438
Daily Pivot Point R2 1.2504
Daily Pivot Point R3 1.254

 

 

Disclaimer: For information purposes only. Past performance is not indicative of future results.
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