**GBP/USD Rebounds Toward 1.3517 as BoE Rate Cut Bets Fade: Dovish Pivot Weakens Dollar**
*By TradingNews.com Staff; Original article by TradingNews.com News Team*
The British pound sterling (GBP) has staged a significant rebound against the US dollar (USD), moving toward the 1.3517 mark after a week of turbulent trading. The surge in the GBP/USD pair is fueled by easing bets on imminent Bank of England (BoE) interest rate cuts and a dovish shift in Federal Reserve (Fed) expectations, which has broadly weakened the dollar. This article analyzes the key drivers behind the pound’s resurgence, the implications of shifting monetary policy stances, and what traders need to consider for the GBP/USD outlook in the coming weeks.
## BoE Rate Cut Bets Recede
The pound has benefited from a reassessment of the BoE’s rate trajectory. Market participants have been absorbed by aggressive central bank movements globally, but recent data and policy signals have reduced expectations that the BoE will deliver rapid cuts in 2024.
### Supporting Factors Limiting BoE Easing
– **Resilient UK Economic Data:** Recent UK GDP, labor market, and inflation reports have not shown enough weakness to trigger an urgent policy response. The unemployment rate has remained relatively stable and inflation is easing, but not as swiftly as in some other economies.
– **BoE Officials’ Tone:** Several BoE policymakers, including Governor Andrew Bailey, have recently sounded less dovish than anticipated. They have emphasized the need for more data before committing to any rate adjustments.
– **Global Central Bank Synchronization:** As the European Central Bank and Fed both hint at a pause or gradual approach to easing, the BoE may coordinate its policy maneuvers to avoid financial instability or excessive sterling volatility.
### Market Reaction
– The probability of a BoE rate cut at the next meeting has fallen sharply, according to swaps pricing.
– Gilt yields have steadied, making the pound more attractive compared to the dollar and the euro.
– Sterling’s relative yield advantage versus the dollar, especially at shorter maturities, has widened.
## The Dollar’s Dovish Turn
At the other end of the currency pair, the US dollar has encountered headwinds following the most recent Fed meeting and incoming economic data. The greenback’s rally has lost momentum as investors price in a more pronounced dovish shift from the US central bank.
### Why Has the Dollar Weakened?
– **Soft US Data:** Key data releases, including retail sales, PMI surveys, and inflation prints, have signaled a cooling economy. Headline inflation is easing and wage growth is stabilizing, reducing the need for further aggressive monetary tightening.
– **Fed Signaling:** The latest Federal Open Market Committee (FOMC) meeting reinforced the message that the Fed is likely at or near its peak policy rate for this cycle. While the committee remains data-dependent, several officials have noted increased risks of overtightening.
– **Yield Compression:** US Treasury yields, in particular at the shorter end of the curve, have declined in response to shifting rate expectations. The yield curve has flattened, eroding the dollar’s interest rate appeal.
### Impact on GBP/USD
– The GBP/USD pair has seen a decisive bounce, with sterling capitalizing on both a less-dovish BoE and broad-based dollar softening.
– Currency market flows have shifted away from safe-haven demand for the dollar and toward more cyclical and risk-sensitive currencies, like the pound and the euro.
## Technical Analysis: GBP/USD Recovery Momentum
The technical backdrop reinforces the fundamental narrative. GBP/USD has rebounded sharply after juggling multi-month lows, and technical signals suggest further upside potential.
### Key Technical Factors
– **Support Levels:** The pair found a solid base around 1.3300, a region that has historically attracted buying interest. The 200-day moving average held firm, offering
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