- GBP/USD is finding it tough to make significant progress as a new week begins.
- Rising expectations for aggressive Fed rate cuts are bolstering the dollar, affecting the pairing.
- GBP bulls seem hesitant ahead of Thursday’s Bank of England (BOE) policy meeting.
The GBP/USD pair opens the week on a cautious note, trading within a narrow range around 1.3260-1.3265.
The U.S. dollar has played a crucial role, not quite reaching its potential in recent weeks due to economic uncertainties related to President Trump’s tariff plans, which has somewhat supported the GBP/USD pair. Furthermore, the likelihood of more aggressive easing from the Federal Reserve seems to be adding pressure on the dollar.
Despite a stronger-than-expected U.S. Non-farm Payroll (NF) Report released on Friday, it appears investors are convinced that the Federal Reserve will resume its rate-cutting cycle soon, potentially lowering rates by 100 basis points by year’s end. This dynamic enhances the appeal of safe havens, coupled with hopes of easing tensions in the U.S.-China trade war.
Nevertheless, traders appear wary of making new bullish moves on the GBP/USD pair and prefer to wait for the BOE’s monetary policy meeting, a significant risk event this week. Many expect the UK’s Central Bank to raise interest rates by 25 basis points while adopting a cautiously optimistic stance given the downside risks posed by the trade war.
Additionally, traders will look to insights from the important two-day FOMC policy meetings concluding on Wednesday. Meanwhile, the U.S. ISM Service PMI released on Monday may offer short-term opportunities in early North American trading.
