The GBP/USD pair moved up at the start of a busy week and for now, seems to have snapped a three-day losing streak to the 1.2600 handle, or more than a two-week low hit on Friday. The spot currency is trading around the 1.2630-1.2635 range, up 0.10% for the day, although meaningful appreciation seems elusive ahead of the key central bank event risks this week.
The Federal Reserve (Fed) is scheduled to announce its policy decision on Wednesday, which will be followed by the Bank of England (BoE) meeting on Thursday. The US central bank is widely expected to lower borrowing costs for the third straight meeting, although traders are pricing in a slower pace of interest rate cuts next year. Hence, the accompanying policy statement, updated economic projections – including the so-called dot-plot – and Fed Chair Jerome Powell's comments at the post-meeting press conference will be scrutinized for clues on the future path of interest rate cuts. This, in turn, will play a key role in influencing the near-term US Dollar (USD) price dynamics and provide some impetus to the GBP/USD pair.
Meanwhile, the Bank of England is expected to maintain the status quo and leave interest rates unchanged. Moreover, the BoE has been stressing that it is taking a gradual approach to rate cuts amid rising inflation expectations. In fact, the BoE and other forecasters expect inflation to pick up next year following UK Chancellor Rachel Reeves' big-spending budget. That said, the dovish outlook of BoE Governor Andrew Bailey, who has hinted at four rate cuts by 2025, might hold traders from placing any aggressive bullish bets around the British Pound (GBP) and act as a headwind for the GBP/USD pair. This, in turn, warrants some caution before confirming that spot prices have bottomed out around the 1.2600 mark.
Investors this week will also face important macro data releases from the UK and the US, starting with flash PMI data on Monday. Additionally, the UK monthly employment details, along with US Retail Sales on Tuesday, followed by UK consumer inflation figures on Wednesday, the latest US GDP data on Thursday and UK Retail Sales on Friday will trigger volatility around the GBP/USD pair.
Source: FXStreet
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