USD/GBP Outlook:
Slightly weaker, but likely to move sideways, as the rate remains below its recent average and lacks a strong driver.
Key drivers:
• Rate gap: The Federal Reserve's recent decision to hold interest rates steady contrasts with the Bank of England's dovish outlook, where a potential cut is anticipated.
• Risk/commodities: Ongoing geopolitical tensions and a "Sell America" trend have put downward pressure on the USD, limiting its strength against the GBP.
• One macro factor: Recent UK inflation data indicates a tighter economic environment, contributing to concerns over the Bank of England’s policy direction.
Range:
The USD/GBP pair is likely to hold within its recent range, lacking the momentum to test extremes significantly.
What could change it:
• Upside risk: A surprising increase in U.S. jobless claims could lend support to the dollar, shifting dynamics.
• Downside risk: Further escalation of political uncertainty in the UK could weigh on the pound, potentially strengthening the dollar's position.
