**GBP/USD Price Holds 1.35 as Fed Rate Cut Bets Increase**
*By TradingNews.com Staff*
The GBP/USD currency pair has demonstrated notable resilience, maintaining its position near the 1.3500 level as market sentiment remains firmly attuned to expectations for rate cuts by the US Federal Reserve. Speculation about an easing monetary policy stance in the United States has tempered dollar strength, giving sterling the opportunity to recover lost ground and potentially chart a more bullish trajectory.
This comprehensive analysis, based on reporting by the TradingNews.com staff, will explore the key drivers shaping the GBP/USD pair’s recent price action, the macroeconomic and monetary policy factors influencing both the US dollar and British pound, and what traders might expect in the months ahead.
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## The US Federal Reserve: Shifting Rate Expectations
Traders and investors worldwide are laser-focused on signals from the US Federal Reserve regarding the path of interest rates. After an aggressive tightening cycle to combat inflation, the central bank has started sending dovish signals, leading the market to price in rate cuts sooner than many previously anticipated.
– **Recent Fed Communications**: Federal Reserve officials have acknowledged slower inflation and hinted at possible easing if economic conditions warrant.
– **Market Repricing**: Futures markets have adjusted, with probabilities rising for a 25-basis-point cut in the coming quarters.
– **US Yields Reaction**: Treasury yields have declined, softening support for the US dollar across major currency pairs.
– **Impact on Dollar Index (DXY)**: The DXY, which tracks the dollar’s performance against a basket of currencies, has lost altitude, making high-yielders and risk currencies, such as the British pound, more attractive.
## UK Economic Outlook and Sterling’s Appeal
The British pound has found support not only from a weaker dollar but also from fundamentally solid economic data coming out of the United Kingdom. Although risks persist—such as inflationary pressures and political uncertainty—the UK economy has managed to avoid the recession many analysts feared.
– **GDP Growth**: The UK has reported better-than-expected quarterly GDP growth, allaying immediate fears of contraction.
– **Inflation Trends**: While inflation remains above the Bank of England’s (BoE) target, it is showing signs of easing, which bolsters consumer sentiment.
– **Labor Market**: Employment data have generally surprised to the upside, contributing to stronger pound performance.
– **Bank of England Policy**: The BoE has been less dovish than many of its central bank peers, supporting GBP through relatively higher yields.
## GBP/USD Technical Analysis: Focus on 1.35 Support
From a chartist’s perspective, the 1.3500 level has emerged as a critical battleground for bulls and bears in the GBP/USD market.
– **Support Zone**: The 1.3500 figure has repeatedly attracted buying interest, with bulls viewing dips toward this region as potential entry points.
– **Moving Averages**: The pair is trading above its 100-day simple moving average, a medium-term bullish indicator.
– **Momentum Oscillators**: Relative Strength Index (RSI) levels have stabilized near neutral territory, suggesting room for a directional move if triggered by news or data.
– **Next Resistance Levels**: Should GBP/USD break convincingly above 1.3550, the next targets include 1.3600 and 1.3680, both of which are technical hurdles marked by previous highs and Fibonacci retracement zones.
– **Downside Risks**: A clear fall below 1.3500 could bring 1.3440 and 1.3380 into play.
## Major Market Themes Shaping GBP/USD
A convergence of influential factors is at play in determining the trajectory of the pound-dollar exchange rate. These include central bank policy divergence, global risk sentiment, data surprises, and geopolitical developments.
### 1. Central Bank Flight Paths
Both the Bank of England and the Federal
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