The Pound to US Dollar (GBP/USD) exchange rate firmed at the start of the week as softer US inflation data fuelled expectations for aggressive Federal Reserve rate cuts and lifted risk sentiment.
Pound to Dollar (GBP/USD): 1.33393 (+0.13%)
Euro to Dollar (EUR/USD): 1.16512 (+0.17%)
Dollar to Japanese Yen (USD/JPY): 152.7575 (-0.21%)
DAILY RECAP:
The US Dollar (USD) lost traction on Monday as markets digested the implications of last Friday’s softer US CPI report.
Headline inflation eased more than expected, reinforcing the view that price pressures are cooling and boosting market confidence that the Federal Reserve could cut rates by up to 50 basis points before year-end.
This dovish shift in expectations weighed on USD across the board, with the currency also pressured by a broad risk-on tone after reports of progress in US-China trade talks.
Meanwhile, the Pound (GBP) traded in tight ranges, with little domestic data to provide direction.
Traders focused on the afternoon’s CBI distributive trades survey, expected to show another dip in retail sales activity — potentially signalling softer consumer demand.
Overall, Sterling’s performance on Monday reflected its rising sensitivity to shifts in global risk appetite rather than homegrown fundamentals.
Near-Term GBP/USD Forecast: Fed Decision Looms Large
All eyes now turn to Wednesday’s Federal Reserve policy meeting.
Markets widely expect a 25bps rate cut, though speculation has grown over a larger 50bps move following last week’s inflation data.
If the Fed delivers a bigger cut or signals further easing ahead, the Dollar could slide sharply.
Conversely, a cautious tone or smaller-than-expected move might prompt a USD rebound.
With the UK data calendar quiet, GBP/USD direction will hinge primarily on the Fed’s decision and the accompanying guidance.
Continued risk-on sentiment would also favour the Pound, while any souring in global mood could see Sterling retrace gains.
