The GBP/USD shows a positive trend today as market participants raise their expectations regarding a potential rate cut by the Federal Reserve in December. The GBP/USD is currently at 1.3082, reflecting a 0.08% increase. The GBP/USD pair has risen to 1.3092 as market participants increase expectations for a potential rate cut by the Federal Reserve in December, driven by positive sentiment data from the US. US PMIs indicate strong business activity, and the Michigan survey points to a rise in confidence alongside a decrease in inflation expectations. Federal Reserve officials exhibit a split in opinions, as Logan and Collins advocate for a cautious approach, while Williams and Miran express their backing for potential near-term easing measures.
The US economic report indicated that business activity in the US continued to show strength, as per S&P Global’s assessment. The Manufacturing PMI decreased from 52.5 to 51.9, falling just short of the anticipated 52 figure. The Services PMI saw an increase from 54.6 to 54.8, surpassing the anticipated figure of 54.5. Survey comments indicated an enhancement in business confidence, with expectations for further rate reductions and the government’s reopening contributing to a more optimistic economic outlook. In November, the University of Michigan reported an increase in Consumer Sentiment, rising to 51 from 50.3, surpassing expectations. Inflation expectations decreased slightly, with the one-year forecast dropping from 4.7% to 4.5%, and the five-year outlook falling from 3.6% to 3.4%.
On Friday, Lorie Logan indicated that rates should remain unchanged “for a time” as they evaluate the effects of current policy on inflation. She stated that she finds it “difficult” to cut in December. Boston Fed’s Susan Collins, stating that “restrictive policy is very appropriate right now.” Conversely, John Williams indicated that there remains potential for rate cuts in the “near-term”, which increased the likelihood of a December adjustment. Governor Stephen Miran echoed some sentiments, stating that Thursday’s data supports a December rate cut, and if his vote were the deciding factor, he “would vote for a 25 bps cut.” In the UK, Retail Sales fell short of expectations in October, and the preliminary PMIs for November presented a mixed picture, with the Manufacturing PMI showing improvement, whereas the Services PMI neared the neutral 50 mark.
The GBP/USD shows a prevailing bias from a technical perspective. Following a weekly peak of 1.3193, the pair has persisted in its downward trajectory. For buyers to reestablish dominance, it is essential for the pair to surpass significant resistance points such as the 1.3100 level, the 20-day SMA at 1.3146, and the 1.3200 threshold. On the other hand, the initial support level for GBP/USD is projected at 1.3050. Upon breaching, the subsequent support level would be at 1.3000, followed by the swing low from April 8 at 1.2764.