**Pound Sterling Slumps to Multi-Month Lows Against US Dollar and Euro Amid Hawkish Fed—CurrencyNews.co.uk Report**
*Original author: Currency News Team*
The British Pound Sterling (GBP) has experienced a significant drop against both the US Dollar (USD) and the Euro (EUR), hitting multi-month lows as markets react to the latest US Federal Reserve policy meeting. The Federal Reserve’s continued hawkish stance, paired with softer UK economic data, has intensified pressure on Sterling, altering the landscape within the global forex markets.
**Fed’s Hawkish Outlook Amplifies Dollar Strength**
The sharp decline in GBP/USD and GBP/EUR exchange rates came after the Federal Open Market Committee (FOMC) signaled a prolonged period of higher interest rates. While the Fed opted to keep rates unchanged during its latest meeting, officials made it clear that interest rate cuts are unlikely to arrive as quickly or as steeply as many investors had previously hoped.
Key takeaways from the Fed’s recent communications include:
– The FOMC highlighted persistent inflationary pressures, suggesting that more evidence is needed before rate normalization can begin.
– Fed Chair Jerome Powell emphasized vigilance regarding core inflation, indicating policy will remain restrictive until there is sustained progress.
– The so-called “dot plot,” which outlines FOMC members’ expectations for future rate decisions, showed a majority now project just one 25-basis-point cut by the end of the year, compared to the two or three previously expected by markets.
– Investors responded by pushing the Dollar Index (DXY) to new multi-week highs, supported by robust US economic data and the promise of elevated yields.
**Pound Sterling’s Slide Against Major Peers**
The immediate forex market reaction saw GBP/USD tumble below the 1.2450 threshold, with the pair breaching multiple technical support levels. Simultaneously, GBP/EUR observed a notable decline, with the Euro benefiting from the comparative cautious optimism of the European Central Bank (ECB) and a still-challenging outlook for the UK economy.
Factors behind Sterling’s slump include:
– A sharp divergence in monetary policy outlooks between the Bank of England (BoE) and the Federal Reserve.
– Waning demand for risk-sensitive assets, of which the Pound is considered one due to the UK’s reliance on international capital inflows.
– Disappointing macroeconomic data out of the UK, compounding concerns regarding domestic growth and inflation.
– Repositioning by major institutional investors, who have trimmed long Pound exposures in favor of the Dollar and the Euro.
**Bank of England Cautious as Domestic Data Disappoints**
While the Bank of England held rates unchanged during its last meeting, officials have adopted a more cautious tone as UK inflation and growth momentum show signs of fading.
Recent data influencing BoE sentiment:
– Headline inflation cooled more quickly than anticipated, particularly in the core and services sectors.
– Retail sales volumes have struggled to advance, reflecting lingering cost-of-living pressures on consumers.
– Unemployment rate edges higher, fueling fears of softening labor market conditions.
– PMI surveys point to stagnation in both manufacturing and services output, suggesting the post-pandemic recovery is faltering.
With inflation now moving closer to the BoE’s 2 percent target, some policymakers argued the door is open for rate cuts later in the year, particularly if growth risks intensify. Traders have responded by bumping up expectations for the BoE to begin easing before the year-end—a sharp contrast to the Fed’s higher-for-longer stance.
**Technical Analysis: Key Levels in Focus**
Market technicians are paying close attention to several key support and resistance levels as Sterling continues to slide:
– For GBP/USD, a decisive close beneath the 1.2400 psychological barrier would open the door to further declines, with intermediate support at 1.2320 and then 1.2200.
– The GBP/EUR cross is eyeing the 1.1500 handle as
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