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Are the central banks of the United States and the United Kingdom "having the same disease but different fates"? GBP/USD may be brewing for a breakup
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Hello everyone, today XM Forex will bring you "[XM Foreign Exchange Official Website]: Are the US and UK central banks "having the same disease but different fates"? GBP/USD may be brewing a storm of disruption." Hope this helps you! The original content is as follows:
Tuesday, December 9th. The foreign exchange market is currently in a wait-and-see stage before policy decisions. The fluctuation range of major currency pairs is limited, and trading sentiment is biased toward caution. GBP/USD was trading around 1.3320 before the US market opened; the US dollar index fluctuated within a narrow range around 99.00, continuing yesterday's trading range, reflecting the market's cautious attitude before the announcement of key monetary policy decisions.
The Federal Reserve is about to announce its latest interest rate decision tomorrow, and the Bank of England will also usher in a policy window next week. The difference in the monetary policy paths of the two major economies is becoming a core pricing factor for the pound-dollar exchange rate. Against the background of divergence of global economic growth momentum, structural adjustment of inflation pressure, and marginal loosening of the labor market, the market is trying to find direction from forward-looking policy guidance. In this environment, exchange rate trends are driven more by expectations than by spot data, showing typical "quiet period" characteristics.
The economic cycles of the United States and the United Kingdom show a certain degree of misalignment, which directly affects the policy orientations of the two central banks. Although the Federal Reserve is almost certain to cut interest rates by 25 basis points at this meeting and lower the federal funds rate target range to 3.50% to 3.75%, there is still great uncertainty about its subsequent policy path. On the one hand, although U.S. inflationary pressures are showing signs of easing, they are still higher than the 2% target level, indicating that price stickiness still exists; on the other hand, labor market demand has slowed, especially as many recent employment indicators have shown that recruitment activities have weakened, and some industries have even seen job cuts. Against this backdrop, the Fed needs to strike a balance between controlling inflation and supporting growth, its policy statement, summary of economic forecasts (i.e. "dot plot") and the content of Chairman Powell's press conference will become the key basis for the market to interpret future interest rate trends. If the Federal Reserve signals a "pause after one rate cut," the U.S. dollar may gain support; conversely, if it hints at further easing, the U.S. dollar may face downward pressure.
In contrast, the UK also faces similar policy choices. The market is generally expecting the Bank of England to follow up with a 25 basis point interest rate cut at next week's interest rate meeting, lowering the benchmark interest rate to 3.75%. Alan Taylor, an external member of the Bank of England, recently said that inflation is expected to return to the 2% target in the short term. "We are still applying the brakes, but I think we can achieve the inflation target." Such remarks have reinforced market expectations for a shift in policy easing. However, unlike the Fed, the Bank of England faces more prominent growth pressures and the rate of inflation decline is relatively mild, which means that its policy space is narrower and the pace of interest rate cuts may be more prudent. Therefore, the public speeches of Bank of England officials in the next few days, especially the speech by Governor Bailey scheduled to be delivered on Wednesday, will become an important window for observing policy trends.
Market Performance
The pound against the US dollar has maintained a narrow consolidation pattern in the past few trading days, with a lack of clear direction in the short term. Technically, the 1.3300 mark forms a certain psychological support, while the 1.3400 area above constitutes resistance. The overall structure shows that the long and short forces are temporarily balanced.
Looking from the 240-minute chart, the pound against the US dollar quickly rose after xm-forex.completing a phased bottom around 1.3179, reaching a maximum of 1.3384, and then entered a sideways consolidation range (about 1.3310-1.3355). The current price is 1.3320, which is located near the middle and lower edge of the box, and short-term long and short are in rebalancing. RSI(14) is about 53, which is in the neutral zone and is not obviously overbought/oversold. Structurally, 1.3305/1.3310 is the proximal support zone. If it fails, you need to pay attention to the connection between 1.3286 and the previous low area; 1.3355 and 1.3384 above are the previous high and selling pressure intensive areas. The overall situation belongs to the shock stage of "digestion after sharp rise". In the follow-up, we can observe the effective breakthrough of the price on the upper and lower edges of the box and the coordination of volume energy/kinetic energy to judge the continuation of the trend or the deepening of the retracement.
Looking to the future
Market logic will still revolve around the game of monetary policy expectations. First of all, the Federal Reserve’s interest rate decision and the accompanying economic forecast report will be the core variables that determine the short-term direction of the US dollar. Among them, the adjustment of the dot plot to the interest rate path in 2026 may trigger market repricing. Secondly, the xm-forex.comments of Bank of England officials will directly affect the valuation basis of the pound. If Governor Bailey emphasizes in his speech that inflation risks are controllable and the economy needs policy support, it will further consolidate expectations of interest rate cuts and put pressure on the pound; conversely, if he expresses concern about the resilience of inflation, it may temporarily boost the pound. In addition, the UK's October GDP data released this Friday will also provide the latest evidence for the economic outlook. If the data continues to be weak, it will enhance the rationality of the central bank's policy easing. andIn the United States, the JOLTS job vacancy data to be released tonight is also worthy of attention. The market expects this value to be 7.2 million. If the actual results deviate significantly from expectations, it may trigger short-term fluctuations.
To sum up, the current operating pattern of GBP/USD is the result of multiple factors: on the one hand, the Federal Reserve is struggling to balance inflation and employment, and on the other hand, the Bank of England is gradually withdrawing from tightening policy in the context of weak growth. The relative changes in the policy rhythms of the two determine the marginal fluctuations in the exchange rate. Although the market has basically digested the expectation of a 25 basis point interest rate cut by both parties, the difference in subsequent policy paths is the key.
The above content is all about "[XM Foreign Exchange Official Website]: The central banks of the United States and the United Kingdom have "the same disease but different fates"? The GBP/USD may be brewing a breaking storm." It is carefully xm-forex.compiled and edited by the editor of XM Foreign Exchange. I hope it will be helpful to your trading! Thanks for the support!
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