- The GBP/USD pair is expected to drop further, reaching around 1.3490 in Friday’s Asian trading session.
- Uncertainty surrounding Fed interest rates is dampening risk appetite and impacting the pound sterling.
- Market participants are anticipating the UK retail sales report for June, due later on Friday.
During Asian trading hours on Friday, the GBP/USD pair fell closer to 1.3490, pressured by increased demand for the US dollar. Market actors are being cautious as they wait for key updates, including President Donald Trump’s tariff deadline and the upcoming Federal Reserve Policy Conference.
The uncertainty surrounding potential interest rate cuts from the US Central Bank has been a significant factor in reducing risk appetite, which, in turn, is affecting the pound sterling. Traders are expecting that the Fed might opt for fewer than two cuts at its July meeting, especially given a steady decline in unemployment claims over the past six weeks.
Meanwhile, Fed Gov. Christopher Waller indicated earlier this month that interest rate cuts might be necessary to bolster a labor market that is showing some signs of weakness. While the market largely expects the Fed to maintain current rates during its next meeting, cuts may happen by September or before the year ends.
On the GBP side, traders seem to expect that the Bank of England will likely cut interest rates at its Monetary Policy Conference in August. Still, insights from the UK retail sales data, due on Friday, are highly anticipated. Predictions suggest a 1.2% month-over-month increase in June, following a 2.7% decrease in May. Should the data come in stronger than expected, it could provide a short-term boost for the GBP against the USD.
