The Pound Sterling (GBP) experienced a significant rebound against the US Dollar (USD) on Thursday, recovering to near the key support level of 1.3400. This surge was primarily driven by growing expectations that the Federal Reserve (Fed) will continue to ease its monetary policy at a faster pace than the Bank of England (BoE).
Market participants are anticipating further interest rate cuts from the Fed, with the CME FedWatch tool suggesting a potential reduction of 75 basis points (bps) in the remaining two meetings of the year. This expectation has increased the probability of a larger-than-usual rate cut in November.
Investors will be closely watching speeches from various Fed policymakers, including Chair Jerome Powell, for clues on future interest rate moves. In his previous comments, Powell emphasized the importance of remaining data-dependent in making policy decisions.
On the economic front, the release of the United States Personal Consumption Expenditure Price Index (PCE) data for August is eagerly awaited. A slowdown in inflationary pressures could further strengthen expectations for a more aggressive rate cut by the Fed.
Daily Market Recap: Pound Sterling Gains
The Pound Sterling traded cautiously against its major peers on Thursday due to a lack of significant UK economic data. However, the overall market sentiment was positive, supported by China’s stimulus measures and growing expectations of additional interest rate cuts by the Fed.
While the BoE is projected to deliver one interest rate cut in the remaining months of the year, its policy-easing cycle is expected to be less aggressive than that of other central banks. This is due to concerns about persistent price pressures, particularly in the service sector.
Technical Analysis: Pound Sterling Strengthens
The Pound Sterling demonstrated a strong recovery, approaching the 1.3400 level against the US Dollar. The pair had previously faced selling pressure after reaching a new more-than-two-year high. The near-term outlook for the GBP/USD remains positive, supported by a rising 20-day Exponential Moving Average (EMA) and a bullish Relative Strength Index (RSI).
