- Pound Sterling fluctuates as market focus shifts to upcoming hearings from several Bank of England (BoE) members before the Treasury Committee.
- Traders are anticipating a 25 basis point rate cut by the BoE in December.
- Meanwhile, Nomura forecasts that the Federal Reserve will keep interest rates unchanged in the same month.
The Pound Sterling (GBP) is trading in a sideways pattern on Tuesday as investors turn their attention to the upcoming Monetary Policy Hearings. Several key Bank of England (BoE) policymakers, including Governor Andrew Bailey, will respond to questions from the Treasury Committee regarding recent interest rate decisions. The hearings, starting at 10:00 GMT, are expected to offer insights into the BoE’s interest rate outlook, a critical factor for the Pound’s movement. In addition to Bailey, Deputy Governor Clare Lombardelli and external MPC members Alan Taylor and Catherine Mann will also be participating.
Looking beyond the hearings, investors are preparing for the release of the October Consumer Price Index (CPI) data on Wednesday, which is expected to have a significant impact on market expectations for the BoE’s December interest rate decision. Traders currently see an 80% probability that the BoE will implement a 25 basis point (bps) rate cut to 4.50%, marking the second consecutive rate cut and the third of the year.
The headline CPI is forecast to rise by 0.5% month-on-month, following a flat reading in September, with annual inflation projected to accelerate to 2.2% from 1.7%. Core CPI, which excludes food and energy prices, is expected to grow by a steady 3.2%. Investors will also closely monitor service sector inflation, a key indicator watched by BoE officials when setting rates.
Daily Digest: Market Movers - Pound Sterling Holds Monday's Recovery Against the US Dollar
- The Pound Sterling (GBP) maintains its recovery against the US Dollar (USD), trading near 1.2680 during London trading hours on Tuesday. The GBP/USD pair rebounded after hitting a fresh six-month low near 1.2600, as the US Dollar’s rally shows signs of stalling following its recent year-to-date high. The US Dollar Index (DXY), which measures the Greenback’s value against six major currencies, is retreating from the 107.00 level.
- In the near term, the outlook for the US Dollar remains positive as market participants expect US President-elect Donald Trump's economic agenda to drive inflationary pressures and foster economic growth. This could lead the Federal Reserve (Fed) to scale back its interest rate cuts.
- Trump's victories in both the Senate and House of Representatives, along with stronger-than-expected October Retail Sales data, have caused traders to scale back their expectations for a Fed rate cut in December. The probability of the Fed reducing interest rates by 25 basis points to 4.25%-4.50% has fallen to 58.4%, down from 77% a month ago.
- Global brokerage firm Nomura anticipates that the Fed will pause its policy-easing cycle in December, citing the potential for tariffs to push inflation higher by summer. Nomura forecasts a 25 bps rate cut in March and June of next year, with risks skewed towards an earlier and more extended pause in the Fed's rate-cutting cycle.
Technical Analysis: Pound Sterling Finds Support Near 1.2600
The Pound Sterling (GBP) is gaining some ground near the 1.2600 level against the US Dollar, showing signs of buying interest. Despite this, the GBP/USD pair remains under pressure, trading well below the 200-day Exponential Moving Average (EMA) around 1.2850, which continues to act as a key resistance level.
The 14-day Relative Strength Index (RSI) is holding near 30.00, indicating strong bearish momentum in the market.
Looking to the downside, the psychological support at 1.2500 remains a crucial level for GBP bulls. On the upside, the pair will face resistance near the 200-day EMA, which will be key to any potential recovery.
