- GBP/USD may recover due to increasing worries about the Federal Reserve’s autonomy.
- The departure of Fed Governor Cook might enhance the likelihood of interest rate cuts.
- CBI retail sales improved slightly from -34 in July to -32 in August, diverging from expectations of -33.
GBP/USD has remained stable after two days of gains, trading around 1.3500 in Asian market hours on Thursday. The pair seems poised to appreciate as the US dollar faces challenges due to rising concerns over the Federal Reserve’s independence.
Market participants are eagerly awaiting the second quarter’s US GDP figures, with attention soon shifting to the Personal Consumption Expenditures (PCE) Price Index for July, the Fed’s favored measure of inflation.
On Tuesday morning, President Donald Trump announced the removal of federal governor Lisa Cook from the Federal Reserve’s board. He also expressed readiness for a legal confrontation regarding allegedly falsified mortgage documents.
Cook’s dismissal could potentially pave the way for significant interest rate cuts, especially since Trump is exerting ongoing pressure on central banks to lower borrowing costs. The CME FedWatch tool indicates that traders are pricing in at least an 88% probability of at least a quarter-point rate reduction at the Fed’s September meeting.
The GBP/USD pair did not experience much movement following the British Industry (CBI) retail sales report. The numbers showed a modest improvement from -34 in July to -32 in August, which was better than the anticipated -33 figure, though indicating that retail sales have declined for 11 consecutive months.
According to the CBI, while businesses are facing rising costs, they have been raising prices at a slower rate than earlier in the summer. However, weak demand and increasing labor costs are contributing to narrower margins, which in turn affect confidence, employment, and investment, as stated by the CBI.
