• The GBP/USD pair falls as the USD posts modest gains on Monday.
  • While the markets held a sense of assurance that the rate-hike cycle had concluded, Powell underscored the Federal Reserve’s readiness to further tighten policy if required.
  • November’s UK S&P Global/CIPS Manufacturing PMI increased to 47.2 from 46.7, exceeding expectations.

The GBP/USD pair maintains its position below 1.2700 on Monday during the Asian session. As speculation that the Federal Reserve (Fed) has completed its tightening cycle exerts pressure on the US Dollar (USD) and generates a tailwind for the GBP/USD pair, the pair’s downside appears to be limited. At present, the major is trading near 1.2680, a decrease of 0.23% on the day.

The markets became more cautious on Friday in response to dovish remarks made by Fed Chair Jerome Powell. Traders favor remaining on the margins in anticipation of Friday’s employment report, which is expected to have a significant impact on the trajectory of US interest rates. As anticipated, Powell stated that it was evident that U.S. monetary policy was decelerating the economy, as the benchmark overnight interest rate had descended into extremely restrictive territory.

Although Powell underscored the Federal Reserve’s readiness to further tighten policy if required, markets were certain that the cycle of rate hikes had concluded. This, consequently, has an overall negative impact on the Greenback.

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Andrew Bailey, governor of the Bank of England (BoE), stated last week that the central bank would do anything to reach its inflation target of 2%, but that he has not observed sufficient progress to be optimistic. The UK S&P Global/CIPS Manufacturing PMI increased to 47.2 in November, surpassing the market consensus of 46.6, from 46.7 in October, as reported on Friday.

Given the lack of economic data from the United Kingdom this week, the GBP/USD pair continues to be influenced by the price dynamics of the USD. The US ISM Services PMI is anticipated to increase from 51.8 to 52.0 on Tuesday. This week will be highlighted by Friday’s release of US Nonfarm Payrolls. In November, the U.S. economy is projected to gain 180,000 employment. In the vicinity of the GBP/USD pair, traders will identify trading opportunities based on these figures.

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