GBP/USD Retreats Amidst Geopolitical Tensions and Fed Rate Cut

5 apr

The GBP/USD pair experienced a retreat to 1.26300 during Friday’s London session, marking a reversal from the 1.2680 level on the 50% Fibonacci retracement. This pullback was fueled by escalating geopolitical tensions and cautious sentiment among traders, particularly ahead of the release of the United States Nonfarm Payrolls (NFP) report for March, which spurred demand for the US Dollar.

The uncertainty surrounding the Federal Reserve's stance on interest rates added to market apprehension. Minneapolis Fed Bank President Neel Kashkari's remarks on Thursday suggested that rate cuts might not be necessary this year if inflation remains subdued. However, Kashkari's projection of two rate cuts for 2024, as indicated in the latest dot plot, contributed to the overall uncertainty.

From a technical perspective, the GBP/USD price retreated after encountering resistance at the 50% Fibonacci level, indicating a potential downward movement. This retreat coincided with geopolitical tensions, further reinforcing the bearish sentiment.

Meanwhile, in the United Kingdom, easing inflation expectations have weighed on the Pound Sterling. The Bank of England's Decision Maker Panel (DMP) survey for February revealed that most firms anticipate a cooling down of selling prices and wage inflation over the next year. Selling price expectations decreased to 4.1%, the lowest reading in over two years, while wage growth expectations softened to 4.9% on a three-month moving average basis.

Given these factors, the outlook for the GBP/USD pair remains bearish, with market participants closely monitoring geopolitical developments, central bank policies, and economic data releases for further guidance on future price movements.

5 apr

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