Potential for further gains on GBPUSD
Technical Perspective:
GBPUSD extended its rally following a rebound above the 1.3210 resistance-turned-support zone. If GBPUSD sustains its bullish momentum, the price could rise to the ascending channel's upper bound and 1.3650 resistance, with a break above 1.3650 prompting further gains toward 1.4000.
Conversely, a reversal below 1.3650 could prompt a throwback and retest of the 1.3120 support. Should GBPUSD break below 1.3120, a deeper retracement toward 1.2750 might occur.
Fundamental Perspective:
The British pound surpassed $1.33, marking its strongest position since March 2022. This surge followed the Bank of England's decision to maintain interest rates at 5% during its September 2024 meeting, aligning with market expectations. The central bank indicated that a gradual approach to easing monetary policy is still appropriate, which has led traders to anticipate about 42 basis points of rate cuts by the end of the year, a decrease from the previously expected 52 basis points.
In contrast, the Federal Reserve announced a significant 50 basis point rate cut and hinted at further reductions, contributing to a weaker US dollar and bolstering the pound's value.
Regarding inflation, the UK's annual rate was 2.2% in August, meeting expectations. However, services inflation rose to 5.6%, and core inflation increased to 3.6%, surpassing the 3.5% forecast. Despite these increases, services and headline inflation remain below the levels projected by the Bank of England in August.
As the Bank of England navigates these economic conditions, the pound's strength will largely depend on future monetary policy decisions and ongoing inflation trends. Investors should watch for potential shifts in rate expectations, as they will significantly influence GBP volatility and overall market sentiment.
By Li Xing Gan, Financial Markets Strategist Consultant to Exness
GBPUSD extended its rally following a rebound above the 1.3210 resistance-turned-support zone. If GBPUSD sustains its bullish momentum, the price could rise to the ascending channel's upper bound and 1.3650 resistance, with a break above 1.3650 prompting further gains toward 1.4000.
Conversely, a reversal below 1.3650 could prompt a throwback and retest of the 1.3120 support. Should GBPUSD break below 1.3120, a deeper retracement toward 1.2750 might occur.
Fundamental Perspective:
The British pound surpassed $1.33, marking its strongest position since March 2022. This surge followed the Bank of England's decision to maintain interest rates at 5% during its September 2024 meeting, aligning with market expectations. The central bank indicated that a gradual approach to easing monetary policy is still appropriate, which has led traders to anticipate about 42 basis points of rate cuts by the end of the year, a decrease from the previously expected 52 basis points.
In contrast, the Federal Reserve announced a significant 50 basis point rate cut and hinted at further reductions, contributing to a weaker US dollar and bolstering the pound's value.
Regarding inflation, the UK's annual rate was 2.2% in August, meeting expectations. However, services inflation rose to 5.6%, and core inflation increased to 3.6%, surpassing the 3.5% forecast. Despite these increases, services and headline inflation remain below the levels projected by the Bank of England in August.
As the Bank of England navigates these economic conditions, the pound's strength will largely depend on future monetary policy decisions and ongoing inflation trends. Investors should watch for potential shifts in rate expectations, as they will significantly influence GBP volatility and overall market sentiment.
By Li Xing Gan, Financial Markets Strategist Consultant to Exness
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