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GBP/USD Surges to a New High, BoE and Fed Policies Under the Spotlight

The GBP/USD pair achieved its highest level since early September, soaring to 1.2644 on Monday.

During the Asian session on Tuesday, it continued its ascent, trading around 1.2630. The Pound Sterling (GBP) has displayed remarkable strength against the US Dollar (USD) for four consecutive days, a testament to the UK’s economic fortitude amid tightening measures implemented by the Bank of England (BoE).

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Bank of England Governor Andrew Bailey recently acknowledged the challenges in reducing inflation to the 2% target. He noted that the recent dip from 6.7% to 4.6% is primarily due to the decline in energy prices. Bailey stressed the urgency of curbing inflation, highlighting its potential negative impact on households, especially as higher prices exacerbate living conditions.

Conversely, the US Census Bureau’s latest report showed a significant downturn in New Home Sales for October, largely ascribed to rising mortgage rates. The 5.6% decrease to 679,000 sales fell below the expected 725,000, reflecting housing market pressures.

Market expectations are currently leaning towards a 25 basis point rate reduction by the BoE in September 2023. Meanwhile, traders are anticipating nearly 85 basis points in cuts by the Federal Reserve (Fed) in 2024, as reflected in money market futures.

Tuesday’s schedule includes a speech by BoE Deputy Governor for Markets and Banking, David Ramsden, likely to draw significant investor interest. The US will also release key data, such as the Housing Price Index and CB Consumer Confidence, along with multiple speeches from Fed officials, providing critical insights into the central bank’s economic perspective.

GBP/USD Technical Outlook

The GBP/USD pair is exhibiting bullish tendencies, spurred by a positive overlapping signal from the stochastic indicator, suggesting a potential continuation of the corrective bullish trend. The next target is set at 1.2720, supported by the EMA50.

This bullish trend’s sustainability hinges on the pair maintaining above the 1.2590 level. The expected trading range for today lies between 1.2570 support and 1.2720 resistance, with a bullish trend anticipated for the day.

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Arslan Butt
Index & Commodity Analyst
Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics.His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker.His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.
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