The GBP/USD pair is under the bearish pressure after breaking below 1.25 area with a daily close. As the US economy struggles with the rate cut uncertainty and weak US jobs data, the pound sterling may regain grounds against the greenback.
Britain's political challenges may impact the upcoming economic momentum as UK Prime Minister Boris Johnson recently stated that he would take Britain out of the European Union on Oct. 31 with or without an exit deal. His opponents say they will try to stop a no-deal exit even if that means forcing an early election. Moreover, Prime Minister Boris Johnson announced a 1.8 billion-pound cash injection for Britain's public health system while seeking to honor his Brexit pledges as he pushes through the country's departure from the European Union. He also committed to putting money into policing, education and regional infrastructure projects, a spending spree that opposition lawmakers describe as evidence the government is on an election footing for later this year. Additionally, President Donald Trump has promised a deal between the US and the UK would be concluded quickly once the latter leaves the European Union which is being questioned by the lawmakers already.
The UK GDP report is to be published on Friday. The figure is expected to decrease to 0.1% from the previous value of 0.3%. The Prelim GDP is likely to drop to 0.0% from the previous value of 0.5%. Manufacturing Production may slide to -0.1% from the previous value of 1.4%.
On the other hand, President Trump's trade advisor called on the US Federal Reserve to cut interest rates by further three-quarters of a point to full point by end of the year to bring US rates into line to with rates elsewhere which might lead the rate to another 75 to 100 points lower. Federal official Bullard recently stated that not much of rate cuts are going to happen soon and pressurizing the Fed for further rate cut will not be taken lightly. According to Bullard, the Fed's shift since the first of the year, from projecting continued rate hikes to cutting rates at its meeting last week, had made monetary policy "considerably" looser and had adequately offset the uncertainty caused by the US trade spat with China, as well as related global developments. Global growth is slowing, the US economy has cooled from its breakneck pace of 2018, and inflation is low. Most crucially, however, the president's erratic trade war is creating enormous uncertainty. In this type of environment, the prudent thing to do is to cut rates even before the first signs of recession.
This week US PPI report is going to be published along with Core PPI and Building Permits which is expected to play a vital role in the upcoming price actions, but the sentiment is still quite dovish.
As of the current scenario, both currencies in the pair is struggling with challenges as US Fed rate cut issue and GBP's political challenges alongside weak economy ahead of Brexit in the coming months may lead to certain volatility.
The pair is trading in a bullish channel. It may sink to 1.2350. Though the price remains above 1.21. As the price is below 1.2500 area with a daily close, the bearish bias is expected to continue.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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