Pound slightly recovers Following Friday’s weak UK GDP driven selling.
In Monday’s North American session, the Pound is still under pressure at around 1.2600 versus the USD. With the US Dollar holding onto gains close to a year-high and the US Dollar Index (DXY) swaying around 107.00, the GBPUSD pair finds it difficult to gain ground.
Fed officials don’t predict how Trump’s policies will affect interest rates.
Due to investors’ expectations that the Federal Reserve (Fed) will adopt a more gradual rate-cut strategy in light of the recent slight recovery in inflation and the growth outlook based on high hopes that Donald Trump, the president-elect, can successfully carry out his economic agenda.
According to the CME FedWatch tool, the Fed has a 62% chance of lowering interest rates by 25 basis points (bps) to 4.25%–4.50% at the December meeting. Compared to the nearly 77% observed a month ago, this represents a significant decline.
Furthermore Analysts are also reevaluating the Fed’s interest-rate outlook for the upcoming year in light of Trump’s victory. According to analysts at Quilter Investors, “the Fed Monetary Policy Committee (MPC) acutely aware that Donald Trump’s policies could be significantly inflationary, primarily due to the impact of lower taxes heating up the economy and tariffs being pass on to consumers.” “Investors will definitely be carefully reading through their remarks for any alleged advice on how that might affect the future direction of interest rates,” they continued.
Moreover Regarding the probable effects of Trump’s policies on monetary policy action and the outlook for the economy, Fed officials have refrained from commenting. “It is too early to reach judgments on the effect of Trump policies,” stated Fed Chair Jerome Powell on Thursday.
Regarding economic data, investors are anticipating Friday’s release of the preliminary S&P Global Purchasing Managers’ Index (PMI) data for November.
Daily Market Update: Pound sterling continues to face pressure from the US dollar.
In an attempt to recover from Friday’s sell-off, the pound sterling is edging higher against its main peers on Monday. The value of British currency declined sharply after the Office for National Statistics (ONS) of the United Kingdom (UK) revealed that the economy unexpectedly shrank by 0.1% in September. In the third quarter, the economy hardly expanded, according to the data.
The Bank of England (BoE) may expect to reduce interest rates further as a result of the unexpected decline in the UK GDP. According to BBVA analysts, “We believe that if UK economic data continues to disappoint, the BoE may become more focused on reviving growth,”
It anticipated that the uncertainty surrounding the UK economy will worsen as the government struggles to decide whether to strengthen trade relations with the US or the EU. Stephen Moore, Donald Trump’s top economist advisor, stated in an interview with According to the BBC, putting the EU ahead of the UK will make the US less eager to cooperate.
UK is somewhat torn between these two economic models, and I think it would be better for the country to adopt more of the American model of economic freedom.
The UK is somewhat torn between these two economic models, and I think it would be better for the country to adopt more of the American model of economic freedom. And if that were true, I believe it would encourage the Trump administration to pursue a free trade agreement with the United Kingdom,” Moore stated. His remarks followed BoE Governor Andrew Bailey’s call for the government to mend fences with the EU.
The UK Consumer Price Index (CPI) data for October, which released on Wednesday, will be of great interest to investors this week. The Expectations for a rate cut by the BoE in December are probably going to be influence by inflation data.
