American Invest Hub
  • Politics
  • Investing
  • Business
  • Latest News

American Invest Hub

  • Politics
  • Investing
  • Business
  • Latest News
Latest News

GBP/USD forecast: sterling outlook after the BoE, Fed decisions?

by admin December 22, 2024
December 22, 2024
GBP/USD forecast: sterling outlook after the BoE, Fed decisions?

The GBP/USD exchange rate dived to its lowest level since May 2024 as the US dollar index surge gained steam. It dropped to a low of 1.2497, much lower than the year-to-date high of 1.3430 after the latest Federal Reserve and Bank of England (BoE) interest rate decisions. 

Bank of England interest rate decision

The GBP/USD exchange rate continued falling as the Bank of England delivered a relatively dovish statement on Thursday.

The bank decided to leave interest rates unchanged at 4.75% as it remained concerned about the elevated inflation rate in the country.

Unlike the Fed and the European Central Bank, the BoE has already embraced a more gradual pace to interest rate cuts. It has slashed rates by just 0.50% this year, while the two other banks have cut by about 1%.

Still, there are signs that a more dovish tilt is emerging from the BoE as 3 officials voted to cut rates by 0.25%.

The BoE decision came a day after a report by the Office of National Statistics (ONS) showed that the headline Consumer Price Index (CPI) rose from 2.3% in October to 2.6% in November. Core inflation moved from 3.3% to 3.5%, still higher than the bank’s target of 2.0%.

The Retail Price Index (RPI) rose from 3.4% to 3.6%, while the harmonized inflation rate moved to 3.5%. These numbers meant that the country’s inflation remains stubbornly high and that the bank has room to leave rates unchanged for long.

UK is in a stagflation

The challenge, however, is that the UK is going through a stagflation process. Stagflation is a situation where a country goes through high inflation and slow economic growth. In theory, it is one of the most difficult situations to manage since cutting rates will lead to more growth, but cause inflation. High interest rates, on the other hand, hurt a country’s growth by limiting the economic growth.

Therefore, the GBP/USD pair crashed because analysts expect that the bank will be more dovish in the coming year. Most analysts expect it to cut rates by 55 basis points, while those at ING estimate that it will cut by 150 basis points. In a note, they said:

“The apparent growing dovish front within the MPC in spite of the latest hawkish wage data potentially suggests a greater focus on slowing activity. That reinforces our dovish view on the Bank of England for next year – we expect 150bp of cuts, against market expectations for around 55bp.”

The GBP/USD pair crashed also because of the hawkish Federal Reserve. In a statement, the Fed hinted that they will deliver two rate cuts in 2025, lower than the previous estimation of four. That hawkish tone pushed the US dollar index to the highest level in over two years.

GBP/USD technical analysis

GBP/USD chart by TradingView

The GBP/USD exchange rate has been in a strong downward trend in the past few months. It has recently formed a death cross pattern as the 50-day and 200-day moving averages crossed each other. 

The pair has also moved below the lower side of the ascending channel. Also, it has moved to the support at 1.2497, its lowest point in November. Therefore, the path of the least resistance for the pair is bearish, with the next point to watch being at 1.2300, the lowest point in April this year. 

The only short-term hope for the pair is that it has formed a small double-bottom pattern at 1.2497 and whose neckline is at 1.2800. That is a sign that it will bounce back soon.

The post GBP/USD forecast: sterling outlook after the BoE, Fed decisions? appeared first on Invezz

0
FacebookTwitterGoogle +Pinterest
previous post
Why is Trump threatening additional tariffs on Europe, and is he serious?
next post
Amazon workers strike: key facilities disrupted amid escalating labor tensions

Related Posts

Putin signals he’s open to peace talks, but...

May 27, 2024

Dow slips 1,700 points, while S&P sheds Wednesday’s...

April 13, 2025

Where is Hind? Calls for answers more than...

February 7, 2024

US holiday retail sales 2024: what drove the...

December 28, 2024

Tens of millions facing hunger and water shortages...

April 5, 2024

Hong Kong journalist says she was fired by...

July 18, 2024

More than 120 killed by raging wildfires in...

February 6, 2024

Dow and S&P 500 extend gains after Fed...

November 10, 2024

Argentine peso futures fall amid uncertainty ahead of...

April 12, 2025

Dow to lay off 1,500 employees as part...

January 31, 2025

    Stay updated with the latest news, exclusive offers, and special promotions. Sign up now and be the first to know! As a member, you'll receive curated content, insider tips, and invitations to exclusive events. Don't miss out on being part of something special.


    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    Latest News

    • Zinc prices rally on US rate cut hopes, despite supply oversupply

      August 27, 2025
    • Mitsubishi exits Japanese offshore wind projects citing soaring costs

      August 27, 2025
    • FBI raid on John Bolton’s home in Washington linked to classified documents

      August 25, 2025
    • Argentine senate deals blow to Milei’s austerity agenda with university budget boost

      August 25, 2025
    • Jackson Hole Symposium: what Powell said about economic effects of Trump’s tariffs

      August 25, 2025

    Categories

    • Business (3,773)
    • Investing (2,787)
    • Latest News (2,050)
    • Politics (1,530)
    • About us
    • Contact us
    • Privacy Policy
    • Terms & Conditions

    Disclaimer: americaninvesthub.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

    Copyright © 2025 americaninvesthub.com | All Rights Reserved