**GBP/USD Edges Lower Near 1.2740: Market Focus on Fed Rate Cut Outlook**
*By FXStreet News, original reporting by Anil Panchal*
The British Pound (GBP) slid against the US Dollar (USD) in early Friday trading, with the GBP/USD pair drifting near the 1.2740 level. Investors are closely monitoring the Federal Reserve’s outlook for interest rate cuts, as markets anticipate potential policy adjustments later in 2024. Meanwhile, the Dollar receives some support from cautious risk sentiment driven by US economic data and mounting speculation about the timing and scale of Fed moves. With Bank of England (BoE) and Fed decisions on the horizon, GBP/USD traders weigh domestic and global factors in anticipation of the next major shift.
**GBP/USD Price Dynamics: Stalling After Recent Gains**
After extending its bullish run in recent weeks, GBP/USD has begun to consolidate, unable to hold above the psychological 1.2800 barrier. The currency pair retraced from its December peak, reflecting a combination of Dollar resilience, mixed UK macroeconomic signals, and cautious positioning ahead of important central bank decisions.
– The pair reversed from monthly highs near 1.2820
– Strong support is found around 1.2700, with resistance remaining near 1.2800-1.2820
– The daily chart shows a fragile uptrend, supported by the 50-day moving average
– Technical indicators signal consolidation, with momentum oscillators flattening as the market awaits fresh drivers
**Market Sentiment: Risk Aversion Lifts the Dollar**
The US Dollar Index (DXY) has recovered ground as risk appetite fades, pulling backing from key US macro data and the repricing of Fed rate cut expectations. Market participants are cautious, given that recent US economic releases show resilience in growth and stickiness in inflation, tempering aggressive dovish bets.
– Global equity markets struggled for clear direction, lending support to the safe-haven Dollar
– The DXY rebounded above 104.00 as markets question the timing and frequency of Fed rate cuts
– Treasury yields have stabilized, reflecting reduced expectations for imminent policy easing
**Fed Rate Cut Outlook: Key Market Driver**
The outlook for the Federal Reserve’s policy path is a primary driver for FX markets, and GBP/USD in particular. Markets had priced in as many as six rate cuts in 2024, but recent data and Fed communications have injected uncertainty, leading many participants to trim those forecasts.
**Federal Reserve Developments:**
– The Fed left its benchmark rate unchanged in December, while signaling a pivot to a more balanced stance
– The latest FOMC meeting minutes showed policymakers remain data-dependent, cautious about unwinding higher rates too soon
– Market-implied probabilities for a March rate cut have fallen, while bets on a May or June move have firmed up
– Persistent inflation and labor market strength complicate the Fed’s ability to deliver aggressive easing
– Several Fed officials, including Chair Jerome Powell, have reiterated the need to see “greater confidence” that inflation is returning to 2 percent before cutting
**Recent US Economic Data:**
– December jobs report remained robust, highlighting ongoing labor market tightness
– ISM Services data came in stronger than expected
– Core PCE inflation remained sticky, still running above the Fed’s target
– Housing and consumer spending indicators suggest resilience in US growth
Collectively, these factors have contributed to increased caution among Fed officials. As a result, traders are watching for clues in upcoming data releases and central bank communications to gauge the likely timing and extent of policy easing.
**Bank of England in Focus: Sterling’s Local Factors**
While Fed expectations dominate global sentiment, the British Pound faces its own set of domestic variables, chiefly the Bank of England’s policy trajectory, mixed UK data, and political backdrop.
**BoE Policy Outlook:**
– The BoE has adopted a wait-and-see approach, keeping rates at multi
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