GBP/USD continues to decline for the third consecutive day on Thursday, falling more than 0.25% as traders drive the exchange rate below the 1.3200 level, in response to the Federal Reserve’s ‘hawkish’ stance on rate cuts, with Chairman Jerome Powell dampening expectations for a reduction in the upcoming December meeting. Currently, GBP/USD is trading at 1.3160, following a daily peak of 1.3218.
GBP/USD experiences a decline for the third consecutive day, decreasing by 0.25% as the Federal Reserve indicates that a rate cut in December is still uncertain. Powell cautions that inflation risks remain skewed to the upside as the Fed concludes its balance sheet runoff on December 1. The Sterling faces pressure due to UK fiscal uncertainty, particularly with reports suggesting that Reeves might modify windfall and income taxes.
> The Pound faces pressure as we approach next week’s BoE decision and the announcement of UK fiscal plans : On Wednesday, the Federal Reserve reduced interest rates to a range of 3.75%-4% in response to the absence of economic data resulting from the ongoing US government shutdown, which has now reached its thirtieth day. The decision reflected differing opinions, as Fed Governor Stephen Miran advocated for a 50-bps cut, whereas Kansas City Fed President Jeffrey Schmid preferred to maintain the current rates. The US central bank has officially declared the conclusion of Quantitative Easing as of December 1. During the press conference, Powell indicated that the balance of risks leans towards inflation on the upside and the jobs market on the downside. He also noted that there were productive discussions at the meeting concerning the decision for December. Powell emphasized that a reduction in December is not guaranteed, stating, “a further reduction in the policy rate at the December meeting is not a foregone conclusion — far from it.”
Meanwhile, the Pound Sterling continues to face pressure as investors focus on the upcoming Bank of England monetary policy decision and the UK budget next week. Reports indicated that UK Chancellor Rachel Reeves is contemplating an early removal of the windfall tax on the UK oil and gas sector. Reports says that Reeves is contemplating a 2 percent increase in income tax. The light US schedule will include appearances by Dallas Fed President Lorie Logan and Michelle Bowman late on Thursday. On Friday, Atlanta’s Fed Raphael Bostic and Cleveland’s Beth Hammack are scheduled to present at a research conference.