After the Federal Reserve’s hawkish rate cut sent GBP/USD tumbling to a three-week low of 1.2560, the currency pair is working to recover its stature, slipping under the 20-day simple moving average by late Wednesday. While the British pound managed to avoid hitting new short-term lows unlike its major counterparts, it managed to hover above the 1.2510 support level. This cautious stance reflects traders’ anticipation of the Bank of England’s upcoming decision on interest rates. Despite this resilience, technical indicators remain predominantly bearish. The recent death cross, a technical pattern indicating potential downtrends, formed by the intersection of the 50-day and 200-day SMAs, looms large as a cautionary sign unless a shift occurs soon.
In the aftermath of a challenging American trading session on Wednesday, GBP/USD saw a robust rebound early Thursday. This rebound comes as investors recalibrate their positions in anticipation of monetary policy announcements from the Bank of England. Following its December meeting, the Federal Reserve cut its key policy rate by 25 basis points, a move that was widely expected. The updated Summary of Economic Projections, often referred to as the “dot plot,” revealed quite a shift. Fed officials anticipate the policy rate to be at 3.9% by the end of 2025, which is a jump from the 3.4% predicted in September. Looking at the projections, views on rate cuts in 2025 varied considerably, with one official foreseeing no cuts, three expecting one cut, ten predicting two cuts, three anticipating three cuts, one seeing four cuts, and another projecting five cuts.
By understanding these dynamics and keeping an eye on upcoming central bank decisions, traders and investors can better navigate the intriguing and ever-shifting landscape of currency exchange.
