**GBP/USD Price Holds Above 1.35 as Sterling Faces Fed Policy Test**
*By TradingNews.com Staff*
The GBP/USD currency pair, commonly referred to as “Cable,” has demonstrated notable resilience in recent sessions, maintaining levels above the key 1.35 psychological and technical threshold. As global markets digest the evolving monetary policy stance of the United States Federal Reserve (Fed), the British pound sterling finds itself at a crucial juncture, balancing domestic economic pressures with shifting sentiment across the Atlantic. This article will examine the driving factors behind GBP/USD’s latest moves, the role of the Fed’s policy messaging, the underlying economic fundamentals in the UK, prominent technical chart levels, and outlooks from notable analysts.
**Fed Policy Shifts and the Dollar’s Impact**
The most impactful macroeconomic driver for major forex pairs in 2024 remains the Federal Reserve. As the US central bank calibrates its next policy steps, reactions in dollar-denominated pairs including GBP/USD have grown increasingly sensitive, particularly around key rate announcements and subsequent policy guidance.
*Key takeaways regarding Fed policy’s impact on GBP/USD:*
– A higher US interest rate environment typically underpins broad-based US dollar strength, putting downward pressure on GBP/USD.
– When the Fed signals a dovish tilt or an end to its rate hiking cycle due to slowing inflation or adverse economic data, risk-sensitive currencies such as sterling may benefit.
– Recent data releases have pointed to a complex backdrop, where US inflation remains within acceptable bounds but growth signals and labor market data are mixed.
On the most recent Fed decision, policymakers opted to hold rates steady within the 5.25 to 5.50 percent range. Markets responded to the central bank’s accompanying statement, which suggested patience on near-term cuts, but also flagged vigilance over changing growth conditions. The US dollar index (DXY) initially spiked higher before giving back some gains as traders reassessed the timing and magnitude of any future policy shift.
For GBP/USD, this context has meant recurrent whipsaws as macro headlines evolve. Short-term pressure on the pound arises whenever US yields spike; conversely, upbeat risk sentiment or dovish US economic surprises have periodically helped sterling.
**Sterling’s Domestic Challenges and Support**
From a UK-centric perspective, sterling has navigated its own set of crosscurrents during 2024. The British economy has faced slowing momentum, with GDP data signaling stagnation, ongoing cost-of-living challenges, and uncertainty over the Bank of England’s (BoE) forward plans for monetary easing.
*Current drivers for the pound include:*
– UK headline inflation remains above the BoE’s 2 percent target, but trends lower from 2023 peaks, giving the central bank scope to end tightening.
– Signs of a recovering housing sector and resilient services output have helped underpin some optimism for the UK economy, offering a buffer for GBP.
– Labor market softness and weakening consumer spending highlight crosswinds for growth, raising downside risks for sterling if policy support is withdrawn too soon.
The BoE has signaled a cautious stance, aligning with other major central banks in prioritizing inflation control while being attuned to growth headwinds. Recent policy communications have underscored the need for convincing evidence of durable disinflation before rate cuts become a reality. Markets currently expect a dovish turn later in 2024, but the timing remains data-dependent.
**Technical Analysis: GBP/USD at the 1.35 Threshold**
For traders, the 1.35 level on GBP/USD is significant both for technical chart watchers and macro speculators. This level served as resistance earlier in 2024, and its defense has therefore taken on even greater importance following recent volatility.
*Technical signals currently shaping GBP/USD price action:*
– A sustained daily close above 1.35 reinforces near-term bullish momentum, potentially targeting the next resistance at 1.3610, followed by 1.3680.
– Failure to hold above 1.
Read more on GBP/USD trading.