The GBP/USD pair is experiencing a decline in the first trading day of 2024, as investors anticipate multiple rate cuts from the Bank of England (BoE) throughout the year. The US Dollar’s modest rebound also contributes to the pair’s losses.
According to the CME Group’s FedWatch tool, the markets are pricing in an 88% chance of rate cuts in March. This prediction aligns with the US Federal Reserve’s indications of a series of interest rate cuts in 2024, in response to easing inflation. Traders are even speculating on aggressive rate cuts starting as early as March, further impacting the GBP/USD pair.
Several economic indicators from the US will provide further guidance for market players. The US Nonfarm Payrolls (NFP) data, which is set to be released later this week, will reveal whether the December figures show an increase of 163K compared to the previous month’s 199K. Additionally, the US Chicago Purchasing Managers’ Index (PMI) for December came in weaker than expected at 46.9, raising concerns about the state of the US economy.
While the Bank of England (BoE) has stated that it is premature to discuss rate cuts, investors are already pricing in the possibility of up to six quarter-point rate cuts throughout 2024. The upcoming BoE monetary policy meeting, scheduled for February 1, will likely provide more insight into the central bank’s stance on rates.
Later today, the UK S&P Global/CIPS Manufacturing PMI for December will be released, giving further indications of the health of the British manufacturing sector. Simultaneously, the US S&P Global Manufacturing PMI will also be published, shedding light on the state of the US manufacturing industry.
The GBP/USD pair faces challenges as the markets anticipate rate cuts from the Bank of England and the US Federal Reserve. With the CME Group’s FedWatch tool indicating an 88% probability of rate cuts in March, traders are preparing for potentially aggressive cuts. The upcoming economic indicators, such as the US NFP data and the Manufacturing PMI reports, will play a significant role in shaping market sentiment. As the year progresses, investors will closely monitor central bank decisions and economic data to navigate the fluctuations in the GBP/USD pair.
Leave a Reply