GBP/USD Down, Rebound?
GBP/USD corrected to around 1.3470 in the Asian session after two days of gains. However, the possibility of a rebound remains as the market tends to be cautious regarding Bank of England (BoE) policy amid persistently strong inflation and signs of a cooling labor market. The BoE previously projected inflation to peak around 4% in September, but officials such as Deputy Governor Clare Lombardelli and MPC member Catherine Mann cautioned that the recent price shocks should not be considered temporary.
Meanwhile, the US dollar strengthened following hawkish comments from Kansas City Fed President Jeffrey Schmid. He emphasized that the Fed must maintain credibility in combating inflation, stating that inflation remains too high, and assessing that current policy is appropriate. This tone boosted the USD and pressured GBP/USD.
Looking ahead, the USD could weaken if the likelihood of a Fed rate cut increases and the US government shutdown continues. The CME FedWatch tool shows a 94% probability of a 25 bps cut in October and an 84% probability of an additional 25 bps in December. The White House denied claims of layoffs due to the shutdown, but warned that the risk could arise if the deadlock persists, while the Senate still fails to pass funding. If the pressure on the USD subsides, GBP/USD could potentially strengthen again. (az)
Source: Newsmaker.id
