The Pound Sterling (GBP) is trading near a fresh seven-week high, hovering around 1.3400 against the US Dollar (USD) on Thursday. This robust performance of the GBP/USD pair comes as the US Dollar struggles, maintaining a weak position in light of the recent Federal Reserve rate cut.
The US Dollar Index (DXY), which measures the Greenback’s value against six major currencies, is currently under pressure near a seven-week low of 98.54. This decline follows the Fed’s decision on Wednesday to lower the Federal Fund Rate by 25 basis points to a range of 3.50%-3.75%, a move that was largely anticipated by investors. The updated dot plot has also indicated a potential interest rate cut projected for 2026.
Market analysts note that the Fed’s dovish guidance, alongside a downward revision of inflation expectations and an acknowledgment of rising unemployment rates, has contributed to the weaknesses seen in the USD. Fed Chair Jerome Powell’s comments emphasized a cautious stance, asserting that “the bar for further interest rate cuts is very high,” indicating that the central bank is prepared to assess economic developments before making further adjustments.
The Pound Sterling’s recent gains are being sustained as investors brace for significant economic data from the United Kingdom ahead of the Bank of England’s (BoE) decision scheduled for next week. Leading up to the BoE’s announcement, the UK’s Office for National Statistics (ONS) is set to release crucial economic indicators, including monthly Gross Domestic Product (GDP) for October and labor market data for the three months ending in October.
Friday’s GDP report is particularly crucial, expected to show a modest expansion of 0.1% after a previous contraction at a similar rate. A positive outcome could enhance growth expectations as the UK fiscal watchdog has revised GDP projections for the year to 1.5%, up from an earlier estimate of 1.0%. Key components within the GDP data, such as Manufacturing and Industrial Production, are also anticipated to show increases, benefiting from low base effects.
As the trading session progresses on Thursday, the GBP/USD pair is likely to be influenced by the US Initial Jobless Claims data set for release at 13:30 GMT, which is estimated to increase from the previous reading of 191K to 220K.
In terms of performance against major currencies, the British Pound is seen to be slightly lower against its peers, except for antipodean currencies. Among the key currencies, it has displayed weakness against the Swiss Franc.
From a technical analysis perspective, the GBP/USD is currently trading at 1.3370 and holds above the upward-sloping 20-day Exponential Moving Average (EMA) of 1.3266, indicating a potential continuation of the upward trend. The 14-day Relative Strength Index (RSI) is showing a bullish trend but has eased slightly, reflecting a sustainable momentum. Continued strength above the 20-day EMA suggests that the GBP could aim for highs around 1.3471, although a close below that EMA could shift sentiment toward a more neutral outlook, potentially leading the pair down towards the November 25 low near 1.3100.
As the market watches closely for economic data from the UK and assesses the implications of recent Fed decisions, the dynamics between the Pound Sterling and the US Dollar continue to evolve, driven by overarching economic indicators and market sentiments.
