Pound Sterling extends losses against the US Dollar
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Daily Currency Update
The pound extended its decline against the US dollar yesterday, dropping to a new 5-week low as recent sterling positions were unwound amid growing global growth concerns. This downward movement could intensify expectations for Bank of England rate cuts, putting further pressure on the pound.Despite the BoE's efforts to temper market speculation and emphasize its data-dependent approach, BoE Governor Andrew Bailey recently acknowledged that it’s reasonable for BoE forecasts to be based on the current market curve, which signals lower rates. This acknowledgement has added to the bearish sentiment on GBP/USD, as the prospect of lower UK interest rates could diminish the pound's appeal against the dollar.
Key Movers
This week's market volatility was exacerbated by a softer-than-expected U.S. job report on Friday and disappointing earnings from major tech companies. This combination triggered a global sell-off in riskier assets, as investors grew concerned about a potential U.S. recession.In response to the job report, traders have revised their expectations for Federal Reserve policy, now anticipating over 1% of easing by the end of the year. Markets are currently pricing in a 70% probability of a 50 basis point rate cut in September.
Expected Ranges
- GBP/USD: 1.2645 - 1.2735 ▼
- GBP/EUR: 1.1585 - 1.1655 ▼
- GBP/AUD: 1.9345 - 1.9425 ▼
- EUR/USD: 1.0885 - 1.0965 ▲