GBP/USD Extends Its Ascent above 1.2550 Ahead of the BoE's Rate Decision
GBP/USD maintains its gains near 1.2560 on Tuesday, despite the weaker USD. As a result of sluggish employment expansion in the United States, there have been rumors that the Federal Reserve will reduce interest rates this year. On Thursday, it is anticipated that the BoE will maintain rates at 5.25% for the fifth consecutive day.

For the fifth consecutive day, the GBP/USD pair is trading in positive territory near 1.2560 on Tuesday during the Asian session. Support is provided to the primary pair by the subdued US Dollar (USD). The focus will be on the interest rate decision made by the Bank of England (BoE) on Thursday; no change in the rate is anticipated.
Investors increased their wagers that the US Federal Reserve will reduce interest rates this year in response to the unexpectedly sluggish April employment data released last week. This week, Fedspeak could potentially provide insights into forthcoming monetary policy. Thomas Barkin, president of the Federal Reserve Bank of Richmond, stated on Monday that the current interest rate level should be sufficient to chill the economy and reduce inflation to the target of 2%. Employment strength will provide officials with additional time to acquire confidence that inflation will decline.
John Williams, president of the Federal Reserve Bank of New York, stated that although rate decreases were inevitable, monetary policy was in an excellent location at the moment. Presidential of the Fed Bank of Minneapolis Neel Kashkari is scheduled to speak later in the day. The dovish stance adopted by Federal Reserve officials may temporarily generate a tailwind for the GBP/USD pair and push the Greenback lower. The financial markets have priced in rate cuts from the Federal Reserve totaling 46 basis points (bps) by the conclusion of 2024, with the initial cut anticipated in September or November, according to the rate probability app developed by LSEG.
Conversely, it is anticipated that the BoE will maintain interest rates at 5.25% during its May meeting on Thursday. Traders will closely observe the BoE's guidance on interest rates and potential timeframes for rate reduction. However, the dovish remarks made by BoE Governor Andrew Bailey and Deputy Governor Dave Ramsden in April have incited conjecture regarding the proximity of the BoE's easing cycle to that of the European Central Bank (ECB) rather than the Federal Reserve (Fed). Bailey of the Bank of England expressed confidence that headline inflation will revert to the target level of 2% in April. The dovish stance of the United Kingdom's central bank could limit the pair's decline by exerting pressure on the pound sterling.
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