Trade Of The Day: Pound Surges Post-Fed, BoE Rate Cuts Expected

Fundamental Analysis

* Post-Fed Rate Cut Hopes: The Pound Sterling has exhibited strength against the US Dollar, driven by investor optimism regarding potential interest rate cuts by the Bank of England (BoE) after rate cut by the Federal Reserve (Fed). Market consensus anticipates rate adjustments during the upcoming June and August policy meetings for the BoE and Fed, respectively. Additionally, the revelation of the extent of fiscal stimulus in the 2024 budget of the United Kingdom also provide further strength.

Technical Analysis

* Technical Breakout: GBPUSD was traded higher while currently testing the resistance level 1.2830. MACD which display ongoing bullish momentum coupled with the market structure surpassing the prior high suggest the potential for the pair to further advance in the short term.

* Resistance and Targets: Should the bullish momentum persist; the price would head towards the subsequent resistance level 1.28825 following a breakout above the resistance level 1.28270. However, a failure to break this resistance may lead to a technical retracement back towards support level 1.2765 in the short term or even a potential reversal for the pair.

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Potential Risks

Moving forward, the trajectory of the Pound Sterling will be influenced by market anticipations of rate cuts by the Bank of England. Investors anticipate a reduction in interest rates by the BoE in August. However, BoE policymakers have emphasized the need for compelling evidence of a sustainable return of inflation to the 2% target before making such a decision.

Read some of the risk management strategies to help you in managing potential trading risks.

Monitoring

Stay updated on U.K data, news regarding BoE, and any shifts in the US Dollar’s strength by following our daily financial news or market insights articles.

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Disclaimer: Trading derivatives involves high risks, and market conditions can change rapidly. The content is for informational purposes only and should not be considered as financial advice. Traders should conduct their own research and consider risk management strategies.