The GBP to USD exchange rate shows a bearish outlook, reflecting recent market developments.
Key drivers include the interest rate differential, with the Bank of England signaling potential rate cuts, while the Federal Reserve is expected to proceed cautiously with its cuts, creating a widening gap in monetary policy. Recent inflation data showed a notable drop in US inflation, which adds to the downward pressure on the USD. Additionally, the UK economy is projected to experience slower growth, contributing to uncertainty for the pound.
In the near term, GBP/USD is likely to trade within a narrow range, reflecting its current price volatility.
A key upside risk could arise from stronger-than-expected UK retail sales, boosting confidence in the pound. Conversely, disappointing economic indicators or further U.S. dollar strength could drive the exchange rate lower.
