British Pound gains ground amid diverging Fed-BoE expectations
GBP/USD gains ground after posting modest losses the previous day, trading around 1.3310 during Asian hours on Tuesday. The currency pair appreciates as the US Dollar (USD) weakens on growing market expectations that the Federal Reserve (Fed) will leave interest rates unchanged.
The British Pound (GBP) strengthened amid diverging expectations between the Federal Reserve (Fed) and the Bank of England (BoE). The US Dollar (USD) weakened as traders anticipated the Fed would maintain interest rates unchanged. Fed Chair Kevin Warsh expressed optimism about the US economy's resilience but refrained from providing specific guidance on future rate adjustments.
Financial markets aligned with this cautious stance, with fed funds futures traders expecting the Fed to keep rates steady at its October meeting, while pricing an 82.8% probability for a rate hike in December. Meanwhile, traders increased their bets on rate hikes from the BoE, with futures markets pricing in four quarter-point increases by July 2027.
Investor focus shifted toward the upcoming UK budget announcement, with major asset managers positioning for fiscal discipline to bolster UK government bonds (gilts). The GBP traded at 1.3310, with the short-term tone mildly bearish as the spot price held below the 50-day Exponential Moving Average (EMA) while trading above the nine-day EMA.
Resistance is located at the 50-day EMA at 1.3349, while support is reinforced by the nine-day EMA at 1.3277. Fed Chair Warsh's speech scored 5.6/10, reflecting a cautious tone.
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