GBP/USD Outlook:
The GBP/USD pair is likely to decrease as it sits near its recent lows and is pressured by expectations of a Bank of England interest rate cut. The pound remains under the strain of UK political uncertainties that may affect its value further.
Key drivers:
• Rate gap: The Bank of England's cautious stance on interest rates contrasts sharply with the Federal Reserve's more aggressive cuts, which is weighing on the pound.
• Risk/commodities: As geopolitical tensions rise, especially regarding potential military actions, the USD is benefitting as a safe-haven currency, putting pressure on the GBP.
• One macro factor: Current speculation around weak UK retail trends could support the view of an imminent BoE rate cut, further hampering the pound's strength.
Range:
Expect GBP/USD to drift within its recent range as pressure mounts, with potential for fluctuations.
What could change it:
• Upside risk: An unexpected positive shift in UK economic data could reverse some rate cut expectations.
• Downside risk: Continued negative sentiment about UK political stability may exacerbate the pound's decline.
