Pound Slips As Market Pare Rate Cut Bets

Fundamental Analysis

* Declining Odds: The pound sterling extend its losses against the greenback following the release of U.S PCE Price Index data which reduce expectation of Fed rate cut bets. The PCE inflation report showed that the core inflation, which excludes volatile food and energy prices, came in with 2.6%, slower than estimates of 2.7%. On a month-on-month basis, the underlying inflation rose by 0.2%, as expected. Currently, financial market participants expect that the Fed is almost certain to start reducing interest rates in September. However, signs of stickiness in price pressures from the PCE inflation data have diminished bets supporting the Fed to start the policy-easing cycle aggressively. According to the CME FedWatch tool, the likelihood of a 50 basis points (bps) interest rate reduction has reduced to 30.5% from 36% recorded a week ago.

Technical Analysis

* Technical Breakout: GBPUSD was traded lower following prior breakout below the previous support level 1.31450. MACD which illustrate ongoing bearish momentum signal suggest the pair to likely further extend its losses

* Resistance and Support: If the bearish momentum persists, there’s a strong likelihood that the price will potentially head towards 1.30450. Conversely, a potential reversal is also to be expected and the price could head back towards 1.32650 after it breach back above the level at 1.31450.

Understand how technical analysis can help you in this trading opportunity.

Potential Risks

Investors will focus on key upcoming U.S. data, including ISM Manufacturing PMI, ADP Nonfarm Employment Change, and Nonfarm Payrolls, to assess the likelihood of a Fed rate cut and also evaluate the pair’s momentum.

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Monitoring

Stay updated on US data and UK, central bank updates and any shifts in the US Dollar’s strength by following PU Prime’s market insights and daily financial news.

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Disclaimer

This content is for educational and informational purposes only and should not be considered investment advice, a personal recommendation, or an offer to buy or sell any financial instruments.

This material has been prepared without considering any individual investment objectives, financial situations. Any references to past performance of a financial instrument, index, or investment product are not indicative of future results.

PU Prime makes no representation as to the accuracy or completeness of this content and accepts no liability for any loss or damage arising from reliance on the information provided. Trading involves risk, and you should carefully consider your investment objectives and risk tolerance before making any trading decisions. Never invest more than you can afford to lose.