GBP/USD is currently consolidating in the North American session on Monday, holding steady around 1.3150. This stability arises alongside growing speculation about a possible resolution to the US government shutdown, lending support to the US Dollar, which has regained some of its previous losses. GBP/USD stays steady as progress in the US Senate boosts optimism about resolving the prolonged government shutdown. Federal Reserve officials are sending mixed signals, with market participants estimating a 60% chance of a possible rate cut in December. The Bank of England’s careful position and the upcoming UK GDP and employment data keep traders focused on Bailey’s monetary policy strategy.
> Sterling continues to show strength despite the Dollar’s rebound as traders are paying close attention to developments : On Sunday, the US Senate passed a measure that facilitates the Federal Government’s reopening, receiving backing from some Democratic lawmakers. The announcement garnered favorable reactions from President Donald Trump, who noted that it seems “like we’re getting very close to the shutdown ending.” The lack of economic data due to the BLS closure has caused investors to depend significantly on commentary from Federal Reserve officials. Recently, St. Louis Fed Alberto Musalem remarked on the economy’s resilience, pointing out that inflation is closer to 3% than to 2%. Earlier, San Francisco Fed President Mary Daly mentioned that inflation has stayed fairly steady in goods prices, highlighting that the rate cut has bolstered the labor markets while putting pressure on inflation.
At present, money markets indicate a 60% chance of a rate cut by the Federal Reserve in the upcoming December meeting. This comes after comments from Chair Jerome Powell during his press conference following the FOMC’s decision, suggesting that a decrease in December is not guaranteed. Last Thursday, the Bank of England decided to keep its rates steady with a 5-4 vote split, a move that many viewed as a cautious approach. Since that time, money markets have increasingly leaned towards expecting a rate cut in December instead of the alternative. The UK docket is crucial as BoE Governor Andrew Bailey has adopted a data-focused approach. As a result, market participants will pay close attention to employment figures and GDP for Q3 this week, looking for clues about possible actions by the BoE in the future. Market participants are closely watching the upcoming November budget in the UK, where a consensus among economists indicates that Rachel Reeves, the finance minister, is expected to raise rates to align with her fiscal guidelines.
GBP/USD continues to show a downward trend, with current spot prices located below the convergence of the 20-day and 200-day SMAs, around 1.3254/65. For buyers to take charge, it is crucial to secure a position at 1.3200 before approaching the 1.3250 level and the previously identified confluence. On the other hand, bears have the upper hand at the moment, yet they haven’t shown enough power to push prices lower. To keep a favorable perspective, they must exceed 1.3100, which is crucial for challenging the recent cycle low of 1.3020 hit on November 4.