19 September 2024, GBP/USD
Event to pay attention to today:
14:00 GMT+3. GBP - Bank of England Interest Rate Decision
GBPUSD:
On Wednesday, the GBP/USD pair reached a new 30-month high, approaching the 1.3300 mark following the US Federal Reserve's (the Fed) decision to cut interest rates by 50 basis points. This marks the first rate cut by a US central bank in four years. The UK's Bank of England (BoE) is scheduled to announce its September interest rate on Thursday, but it is not anticipated that the BoE will make any adjustments following the earlier reduction in discount rates.
It is anticipated that the Bank of England will maintain interest rates at 5.0% following a vote of seven to two. The Bank of England's Monetary Policy Committee (MPC) previously voted five to four in favour of cutting interest rates by 25bps from 5.25%. In light of this, markets expect the Bank of England to keep interest rates unchanged at this meeting.
The Federal Open Market Committee's (FOMC) Consolidated Economic Forecasts dot plot has also been revised downwards from the previous Fed Funds Rate forecast. The median expectation of the Federal Reserve is that the federal funds rate will be 4.4% by the end of 2024 and 3.4% by the end of 2025. This is a decrease from the previous forecasts of 5.1% and 4.1%, respectively.
A closer examination of the Fed's notes reveals that the central bank now anticipates U.S. gross domestic product (GDP) growth of 2.0% through 2024, a decline from the previous 2.1% projection released in June. Additionally, Fed officials anticipate that the US unemployment rate will reach 4.4% by the end of 2024.
In a follow-up press conference after the Fed's 50 bp rate cut, Fed Chairman Jerome Powell sought to reassure markets, emphasising that the Fed will continue to take a wait-and-see approach to incoming economic data in the coming weeks before deciding on further rate cuts. The Fed chief's measured approach to explaining the Fed's policy adjustment has helped maintain market equilibrium and market participants estimate a 65% probability that there will be no further action at the next FOMC meeting on 7 November.
Trading recommendation: Trading predominantly Buy orders from the current price level.
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