GBP/USD: Continues to Struggle Amid UK Fiscal Risks
The GBP/USD currency pair managed to recover slightly in the early Asian session on Monday, posting modest gains around 1.3465, ending a three-day downtrend. However, the potential for further gains for the pound sterling (GBP) appears limited, amid concerns about UK Chancellor of the Exchequer Rachel Reeves' ability to control the country's budget. These fiscal concerns could limit further gains, although Bank of England (BoE) Chief Economist Huw Pill is scheduled to speak later on Monday.
The latest public sector figures showed that UK public debt reached £18 billion, a five-year high for the month. This figure was significantly higher than economists' expectations of a government budget of £12.8 billion. Analysts worry that this surge in debt will worsen the UK's fiscal burden and increase risks related to the country's finances, which could put selling pressure on GBP/USD.
On the monetary policy front, the Bank of England (BoE) decided to maintain interest rates at 4.0% at its last meeting, amid an uncertain economic growth outlook and a weak labor market. The BoE also emphasized that cautious and gradual easing of monetary policy is still considered necessary. While this decision did not lead to further rate cuts, it could help limit the decline in GBP/USD in the near term.
Meanwhile, the US Federal Reserve's decision to cut interest rates last month also impacted the market. The Fed indicated the possibility of two more rate cuts before the end of the year. However, a statement from Fed Chairman Jerome Powell stated that this cut was more about "risk management" and that future decisions would be made "meeting by meeting," suggesting a more cautious easing cycle than many investors had expected. On Monday, the market will await further comments from Fed officials, which may provide clearer clues about the future outlook for US interest rates. (ads)
Source: Newsmaker.id
