**GBP/USD Weekly Forecast: Range-Bound Ahead of BoE, Fed Cut Decisions**
*By Yohay Elam. Published on ForexCrunch.com.*
**Overview**
The GBP/USD pair ended the recent week largely unchanged, maintaining a cautious stance amidst rising speculation surrounding imminent monetary policy decisions from the Bank of England (BoE) and the US Federal Reserve (Fed). With inflationary pressures seemingly abating in both economies and central banks set to meet soon, traders opted for a wait-and-see approach. The forthcoming week is expected to be equally crucial, as investors look toward rate decisions that could steer the next major move in the currency pair.
This article examines the factors underpinning the current range-bound behavior in GBP/USD, assesses recent data releases and market sentiment, and previews what traders should expect from the BoE and Fed.
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**GBP/USD: Consolidation Under Central Bank Watch**
The sterling-dollar exchange rate traded within a well-defined range over the past week, reflecting broader market indecision:
– GBP/USD traded mostly between 1.2700 and 1.2850.
– Market volatility remained subdued despite evolving global growth narratives and mixed risk sentiment.
– Central bank expectations dominated price action, as traders weighed likely paths for rate cuts.
– Investors awaited clarity on timing and scope of policy easing from both the BoE and Fed.
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**Key Drivers Affecting GBP/USD This Week**
**1. Inflation and Economic Data**
Both the UK and US economies produced data hinting at moderating inflationary trends.
– UK Consumer Price Index (CPI) for September confirmed inflation continues to ease, now closer to the BoE’s 2% target.
– US PCE inflation, the Fed’s preferred gauge, also dipped, fueling hopes for a dovish policy response.
However, neither country displayed enough economic weakness to trigger an immediate policy pivot, keeping markets hesitant:
– UK wage growth remained robust, supporting consumer demand.
– US jobs data, while slowing, did not suggest a labor market collapse.
**2. Central Bank Communication and Market Pricing**
– Recent BoE speakers signaled a shift in tone: fewer appear willing to hike further, but most remain hesitant to signal early cuts.
– The Fed’s own messaging has reinforced a data-dependent stance, with officials wary of inflation persistence but open to rate reductions as growth slows.
Money markets now price in the possibility of rate cuts in both economies in the coming quarter, yet doubts linger about the exact timeline. The result has been a standstill in GBP/USD, as neither currency gains a decisive yield advantage.
**3. Broad Market Sentiment and External Drivers**
– Geopolitical risks and global growth uncertainty continued weighing on investor mood, leading to intermittent bouts of risk aversion.
– Movements in US Treasury yields directly impacted the dollar, with dips in yields supporting GBP/USD and spikes favoring the greenback.
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**What to Watch: BoE and Fed Meetings Ahead**
The primary drivers for GBP/USD in the coming week will be the closely-watched monetary policy announcements from the BoE and the Fed.
**Bank of England (BoE) Policy Decision**
– The BoE’s November meeting is widely anticipated, with speculation rife about a potential policy shift.
– Markets expect the BoE to keep rates unchanged, but the tone of Governor Andrew Bailey’s press conference will be scrutinized for hints regarding rate cut timing.
– Any acknowledgment that inflation is durably on track to meet the target, or that economic slack is increasing, could spur expectations for an earlier easing cycle.
**Federal Reserve (Fed) Policy Decision**
– The Fed is also expected to keep interest rates steady at its upcoming meeting.
– Chair Jerome Powell’s remarks will be pivotal in determining whether market participants move up or push back their rate cut expectations.
– Dovish hints could catalyze a further drop in the US dollar, lifting GBP/USD, while any pushback on prematurely pricing rate cuts could weigh on the pair.
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