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The GBP/USD Maintains Its Position Above 1.2100 And Turns To The US PCE Price Index For Renewed Momentum
On Friday, GBP/USD lacks a clear intraday trend and fluctuates within a narrow range. Continued hawkish expectations from the Federal Reserve provide USD support and limit the upside. Wagers on the BoE maintaining the status quo and acting as a headwind in November.
During Friday's Asian session, the GBP/USD pair fluctuates between sluggish gains and minor losses, unable to capitalise on the previous day's respectable recovery from the 1.2070 area, which marked a three-week low. In contrast, spot prices effectively maintain their position just above the round-figure threshold of 1.2100 and continue to be influenced by the price dynamics of the US Dollar (USD).
The optimistic GDP report, which indicated the fastest-growing economy since 2021, was largely overshadowed by indications of subsiding inflationary pressures in the United States (US). This, in turn, caused the overnight decline in US Treasury bond yields. This causes USD investors to remain on the defensive, thereby providing the GBP/USD pair with some support. However, a significant decline in the value of the USD remains elusive in light of the increasing consensus that the Federal Reserve (Fed) will maintain its hawkish position.
Incoming macroeconomic data from the United States continues to indicate a resilient economy, defying dire recessionary forecasts; this should enable the Federal Reserve to maintain higher interest rates. This should provide a tailwind for the greenback and help limit the downside for US bond yields. In addition, traders' apprehension that the Bank of England (BoE) will maintain interest rates at a 15-year high of 5.25% on November 2 could impede bullish wagering on the British Pound and restrict the movement of the GBP/USD pair.
It is advisable to exercise caution and await substantial follow-through purchasing activity prior to concluding that spot prices have established a near-term bottom and preparing for a significant upward trend. Additionally, investors may choose to exercise restraint until Friday's release of the US PCE Price Index, which will impact expectations regarding the trajectory of future rate hikes by the Federal Reserve. This will stimulate demand for the USD and offer some momentum to the GBP/USD pair in anticipation of the significant central bank event risks that occur next week.
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