Budget Concerns Weighs on The Pound
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Daily Currency Update
The pound has surged over the past three weeks, reaching a two-year high. However, recent market activity has shifted towards profit-taking, with GBP/USD showing a slight decline yesterday. This dip reflects a cautious sentiment in the FX market as traders lock in gains.Comments from Keir Starmer regarding the 'painful' decisions anticipated in the upcoming October 30 budget may have dampened enthusiasm for the pound. While these remarks could introduce uncertainty and potential downside for the currency, the pound has largely been driven by broader market risk sentiment.
Key Movers
Investor confidence in imminent U.S. rate cuts was solidified by Fed Chair Jerome Powell's recent comments at Jackson Hole, where he indicated that the time has come for lower rates. His remarks echoed similar sentiments from other Fed policymakers in recent weeks. Markets have now fully priced in a 25-basis-point rate cut from the Fed next month, with a 34.5% probability of a larger 50-basis-point reduction.The anticipation of reduced U.S. rates next month has significantly weakened the dollar, which had previously been bolstered by the Fed's aggressive tightening cycle over the past two years. As a result, the dollar has depreciated by approximately 2.9% so far this month, positioning it for its sharpest monthly decline in nine months, adding pressure on the currency in the FX markets.
Expected Ranges
- GBP/USD: 1.3185 - 1.3245 ▲
- GBP/EUR: 1.1865 - 1.1915 ▲
- GBP/AUD: 1.9375 - 1.9455 ▲
- EUR/USD: 1.1085 - 1.1165 ▲