17 April 2024, GBP/USD
Event to pay attention to today:
09:00 GMT+3. GBP - CPI m/m
GBPUSD:
The GBP/USD pair remains on the defensive around 1.2430 in the early Asian session on Wednesday. Further US Dollar (USD) gains, driven by Federal Reserve (Fed) Chairman Jerome Powell's aggressive outlook, and good US retail sales data are putting pressure on the GBP/USD pair. On Wednesday, investors will be focused on the UK Consumer Price Index (CPI).
On Tuesday, Federal Reserve Chairman Jerome Powell stated that monetary policy should be tighter, further dampening investor hopes for a significant rate cut this year. Powell additionally noted that recent economic data has not provided the Federal Reserve with the confidence it requires, and that it will likely take longer than expected to achieve that confidence. The US central bank has maintained its benchmark interest rate in a target range between 5.25% and 5.5% since July 2023. Financial markets have had to adjust their expectations for rate cuts this year, now expecting one or two cuts that won't start until September.
Conversely, investors are anticipating two rate cuts by the Bank of England (BoE) this year, with the first coming in August or September, as well as an earlier rate cut than the Fed. This has placed pressure on the Pound Sterling (GBP) and created a headwind for the GBP/USD pair. On Tuesday, Bank of England Governor Andrew Bailey stated that there is strong evidence that UK inflation is falling and that the question for Bank of England policymakers is how much more evidence is needed before they start cutting interest rates. Bailey also noted that the different paths of inflation in the US and Europe this year could lead to slightly different paths of interest rate cuts.
Trading recommendation: Trade with buy orders when the price reaches 1.2470. Sell at the price level of 1.2410.
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