Pound Sterling Strengthens as BoE Eases Policy Gradually
Pound Sterling strengthens as the BoE appears to adopt a gradual approach to monetary easing
FUNDAMENTAL OVERVIEW:
- The Pound Sterling climbs as traders anticipate two more BoE rate cuts this year.
- Meanwhile, the US S&P Global Services PMI contracts for the first time in 25 months.
- Investors now turn their attention to US Durable Goods and January’s PCE inflation data for further market direction.
The Pound Sterling (GBP) strengthens as investors anticipate a gradual policy-easing approach from the Bank of England (BoE) this year. Robust UK Retail Sales, higher-than-expected January CPI, and solid wage growth in the three months ending December have led traders to scale back expectations of aggressive BoE rate cuts.
Traders anticipate the Bank of England (BoE) will implement two more rate cuts this year, aligning with money market expectations. Earlier this month, the BoE lowered its key borrowing rate by 25 basis points to 4.5%.
However, analysts at TD Securities project four additional cuts this year, citing uncertainties around potential tariffs under a second Trump presidency. The firm has pushed its forecast for the next rate cut to May from March, following stronger-than-expected UK economic data.
Speeches from BoE officials, including Clare Lombardelli, Swati Dhingra, and Deputy Governor Dave Ramsden on Monday, may offer further monetary policy insights.
Meanwhile, February’s flash S&P Global/CIPS PMI data met expectations, with the Composite PMI slightly easing to 50.5 from 50.6 in January. While the services sector saw stronger expansion, manufacturing activity contracted at a sharper pace.
GBP/USD TECHNICAL ANALYSIS DAILY CHART:
Technical Overview:
GBP/USD is trading within a up channel.
GBP/USD is moving above 10&50 Moving Averages (SMA).
The Relative Strength Index (RSI) is in Buying Zone, while the Stochastic oscillator suggests Neutral trend.
Immediate Resistance level: 1.2673
Immediate support level: 1.2621
HOW TO TRADE GBP/USD
On a higher time frame, GBP/USD initially experienced a sharp decline before finding support and reversing upward. The pair has since broken through a key resistance level and is now trading above it. However, it is currently facing rejection and pulling back toward the support zone. If this support holds, GBP/USD may resume its upward trajectory.