US Dollar struggles ahead of Bank of England speech

Daily Currency Update

The US Dollar is struggling to recover floating near its lowest level since September. US CPI and the PPI data released last week indicated that high prices have finally ended. Leaving investors believing that this allows the Federal Reserve to maintain the same stance and hold rates at its December meeting which continues to weigh on the US Dollar and benefit the pound. During the Asian session, the pound remains steady and it is trading just below the two-month high range that it touched last week.

Investors have been pricing in the potential for the Fed to start cutting interest rates in early 2024 planning ahead for an economic soft landing. In turn, it may have influenced the yield on the benchmark 10-year US government bond to a two-month low level of 4.379% on Friday.

On the other side, the pound sterling investors also view that the date has been brought forward at which they expect the Bank of England to begin cutting interest rates from their 15-year peak in the wake of looming recession risks. The views come to light with the weaker UK Retail Sales figures, which added to a release of negative readings last week and painted a concerning picture and outlook for the UK economy. This might keep a firm hold over gains and positive traction in the pound while investors remain cautious in placing further bets on GBP/USD. That said some major banks still view from a technical perspective that there is room for GBP to trade higher towards the highs seen last week, but with resistance at these levels.