Pound under pressure ahead of Monetary policy decisions by the Fed and the BoE.
The pound Sterling (GBP) falls as Investors become Cautious ahead of a busy week. The GBPUSD pair Gradually Decreases ahead of the Bank of England’s (BoE) and Federal Reserve’s (Fed) interest rate Decisions, which are likely to keep rates Unchanged for the fourth Consecutive time.
The Bank of England’s Policymakers will be tested due to high Inflation and a gloomy Economic outlook.
While the BoE is expected to remain stable, clarity on the interest rate outlook will be crucial. Consider future Pound Sterling movements. The Bank of England is trying to strike a balance between vulnerable Economic conditions in the Domestic and international markets and persistent price pressures. The BoE’s decision to keep interest rates higher for an extended length of time may weaken labor market and demand conditions, whilst a dovish signal will re-inflate prices.
Fed is anticipated to detail how it would implement a 75 basis point rate cut in 2024.
The market appears to be broadly cautious as a result of Middle East tensions and the Fed’s monetary policy statement. Investors will be watching closely to see whether the Fed will drop interest rates for the first time after a lengthy “rate-tightening” campaign at the March or May meetings.
Daily Market Movers: Pound Sterling risks a sell-off on risk-off sentiment.
Pound Sterling falls below the critical support of 1.2700. As the appeal for risk-perceived assets weakens. advance of the monetary policies of the Federal Reserve and the Bank of England. Which are slated for Wednesday and Thursday, respectively.
The decision-making process for BoE policymakers is expected to be extremely challenging. Because the UK economy is experiencing high inflation and the economic future is uncertain.
The UK economy’s growth rate fell by 0.1% in the third quarter of 2023. As enterprises ran at lower capacity due to sluggish demand.
A similar performance is expected in the fourth quarter of 2023. As firms were hesitant to use their maximum capacity or make new investment decisions to avoid increasing interest commitments.
UK economy is deemed to be in a technical recession.
The UK economy is deemed to be in a technical recession if it declines continuously in the fourth quarter. In 2023, BoE officials will weigh core and service inflation when making interest rate choices. Current rates of 5.1% and 6.4% are much higher than desired, limiting the possibility of a dovish move for the time being.
The Bank of England is expected to hold interest rates unchanged at 5.25% on Thursday for the fourth time in a row.
It will be fascinating to see whether the BoE provides dovish guidance. Due to a weakening demand situation or continues to push toward restrictive interest rates.
Meanwhile, the market stays calm as investors analyze Middle Eastern tensions.
Dollar Index (DXY) is marginally up to approximately 103.50.
The US Dollar Index (DXY) is marginally up to approximately 103.50 from Monday’s close. But is projected to stay uninspiring as investors awaitFed policy meeting.
The Fed, like the BoE, is projected to leave interest rates unchanged in the 5.25-5.50% range for the fourth consecutive time.
Market players appear to be convinced that the Fed will begin lowering interest rates in May. Citing diminishing price pressures.
During today’s session, investors will pay close attention to the US JOLTS Job Openings data. Investors estimate that US firms added 8.75 million jobs in December, up from 8.79 million in November.
