The Fed Puts the Brakes on, GBP/USD Accelerates
The GBP/USD pair strengthened sharply today and briefly broke through a seven-week high, climbing back to near the 1.3400 area. The trigger came from America: the Fed cut interest rates for the third consecutive time, in line with market expectations. What further pressured the dollar wasn't just the rate cut itself, but also Jerome Powell's cautious communication style. He hinted that the Fed could enter a "wait and see" phase, meaning it wouldn't aggressively raise interest rates again.
From the official projections, the Fed only predicts one rate cut next year, thus appearing to want to remain conservative. However, the market isn't fully committed to this official scenario. Interest rate market participants are already pricing in two or more cuts by 2026, meaning they believe the Fed will ultimately be more dovish than currently acknowledged. Furthermore, Powell also emphasized that rate hikes are almost off the table, and this is being interpreted by the market as a clear signal that the era of rate hikes is over. Impact on GBP/USD:
– The US dollar weakened, as falling interest rates and expectations of further rate cuts reduced the appeal of dollar-denominated assets.
– The British pound automatically benefited, pushing GBP/USD higher.
Meanwhile, global stock markets tended to stabilize as the Fed's decision met expectations, helping ease tensions ahead of the end of the year. The combination of an increasingly cautious Fed, the slim chance of a rate hike, and the market already pricing in more aggressive rate cuts were all key factors contributing to GBP/USD's strength today. (az)
Source: Newsmaker.id
