The GBP/USD currency pair thus had a continuation of fresh downside pressure on the last full-week, as it traded around the 1.3470 area. This trend is being primarily fueled by a mild comeback of buying interest in the U.S. dollar. According to one report, investors are recalibrating their bets on the economy’s trajectory amidst the new wave of economic data. As the market awaits the Federal Reserve’s meeting on September 17, expectations of a potential rate cut loom large, influencing trading patterns.
U.S. Personal Consumption Expenditures (PCE) data came out for July recently and matched consensus expectations. This rare alignment has opened the door for the Federal Reserve to pursue its own monetary easing next month. This new development makes trading GBP/USD more difficult. Investors are still working to gauge the effect of recent inflation metrics on the path of monetary policy.
Recall that one month ago, the July payrolls numbers caused huge cross-asset market volatility, in large part because of their polarizing quality. To put these numbers in context, many saw them as an affront to President Trump’s legacy on the economy. This backdrop of uncertainty still continues to echo across financial markets today, including how it has influenced the performance of GBP/USD.
Despite the early losses, the GBP/USD pair reversed course in intraday trading, bouncing off two-day lows. Traders are looking ahead to the 1.3500 psychological figure. They are keeping their options open, as ongoing volatility in market conditions shows no sign of abating.
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As I write this, gold prices are skyrocketing. They are approaching four-month highs, topping $3,450 per troy ounce. Gold’s ascent is evidence that traders are decidedly placing bets on a rate cut from the Federal Reserve in September. Welcome to the confounding GBP / USD wildness.
As investors closely monitor the most recent PCE numbers and what future Fed actions will mean, market participants continue to exhibit wariness. This push and pull between the strength of the currency and various economic indicators will all probably factor into how traders set strategies as the week goes on.