**GBP/USD Forecast: Sterling Slides to Seven-Month Low Before BoE Decision**
*Based on the original article by Kenny Fisher, MarketPulse, with supplemental analysis.*
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**Market Overview: Sterling Faces Mounting Pressure Ahead of BoE Meeting**
The British pound (GBP) has experienced a sharp decline against the US dollar (USD), with GBP/USD tumbling to its lowest levels in seven months. This downward trajectory comes as markets anxiously await the Bank of England’s (BoE) upcoming monetary policy announcement. GBP/USD breached the 1.25 support mark and continued falling, underscoring growing concerns over the UK’s economic outlook and the relative strength of the US dollar.
**Key Highlights**
– GBP/USD slumped to its lowest level since November of the previous year
– Currency pair pressured by a stronger dollar and weak UK data
– BoE meeting widely anticipated, but markets divided on future rate direction
– A dovish BoE or even a prolonged hold could drive further pound weakness
– US inflation and rate expectations provide backdrop of dollar strength
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**Pound’s Persistent Weakness: What’s Driving the Decline?**
The recent slide in sterling stems from several intertwined factors, both domestic and international. The primary forces at play include monetary policy divergence, underwhelming UK economic data, and risk-off sentiment supporting the dollar.
**1. Monetary Policy Divergence**
The Bank of England is expected to hold its key Bank Rate at 5.25% during the June meeting. While this is its highest level in over 15 years, the BoE has adopted a noticeably less hawkish tone compared to the US Federal Reserve. Unlike the Bank of England, the Fed continues to project a cautious stance on rate cuts, citing sticky inflation, despite some softening in recent US economic data.
– The Fed’s reluctance to initiate rate cuts before seeing convincing evidence of receding inflation has led to persistent dollar strength.
– Market participants now perceive the BoE as one of the more likely major central banks to begin cutting rates in 2024.
**2. Weaker Economic Data from the UK**
Recent economic indicators from the UK have failed to inspire confidence in a robust recovery:
– The latest UK inflation report, while softer than previous ones, remained above the BoE’s 2 percent target.
– Retail sales have disappointed, and consumer demand remains lackluster amid restrictive interest rates and the cost-of-living crisis.
– The labor market shows signs of loosening, with modest wage growth and increasing unemployment claims.
**3. Political and Fiscal Uncertainty**
Additionally, upcoming UK general elections in July have increased uncertainty. The prospect of policy changes or fiscal adjustments under a new administration adds further risk aversion among investors, nudging them toward safe-haven assets like the US dollar.
**4. Dollar Resilience in a Risk-Off Environment**
– The US dollar continues to benefit from its safe-haven status as geopolitical and economic uncertainties weigh on global
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