Pound Rises, Dollar Starting to Overwhelm?
The GBP/USD pair continued to strengthen for the seventh consecutive day, and in Friday's Asian session, it was trading around 1.3240. This increase occurred as the US dollar weakened as markets became increasingly confident that the Federal Reserve would cut interest rates in December. According to the CME FedWatch Tool, market participants now see a greater than 87% chance of a 25 bps rate cut at the December meeting, a sharp increase from just around 39% a week earlier. The market has also begun pricing in three additional cuts by the end of 2026, further increasing pressure on the dollar.
Expectations of a rate cut have strengthened following reports that Kevin Hassett, Director of the White House National Economic Council, is a leading candidate for the next Fed chairman. Market participants believe Hassett aligns with US President Donald Trump's preference for low interest rates to support economic growth. If this scenario holds true, the market sees a greater likelihood of US monetary policy moving towards a looser path in the next few years, further supporting GBP/USD's strength.
In the UK, the pound sterling also received support from market reassessment of Chancellor Rachel Reeves' latest budget and her commitment to maintaining fiscal discipline. However, sentiment faltered after initial projections from the Office for Budget Responsibility (OBR) showed weaker economic growth, while simultaneously revealing a fiscal buffer of around £22 billion, larger than previously estimated. Despite concerns that fiscal tightening could be too aggressive, news that the UK's public finances were generally improving helped stabilize the pound and maintain its strengthening trend against the dollar. (az)
Source: Newsmaker.id
