GBP/USD Outlook:
Slightly positive, but likely to move sideways as the rate is above its recent average without a clear driver.
Key drivers:
- Rate gap: The Bank of England's cautious stance on interest rates contrasts with the U.S. Federal Reserve, which is attempting to manage inflation while holding rates steady.
- Risk/commodities: With oil prices fluctuating, the UK economy's reliance on energy import costs could weigh on the GBP, especially amid uncertainty.
- One macro factor: Political tensions in the UK are affecting the pound; ongoing questions about Prime Minister Keir Starmer's leadership are contributing to instability.
Range:
Expect GBP/USD to hold steady within its recent 3-month range as pressures balance out.
What could change it:
- Upside risk: A significant improvement in UK economic indicators could boost GBP confidence.
- Downside risk: Escalating political instability surrounding the UK government could lead to further GBP weakness.
