The GBP/USD pair is facing challenges in gaining traction following a modest rebound from the 1.3020 level, a one-month low, as it trades within a narrow range during the Asian session on Friday. Current prices hover in the mid-1.3000s, showing little movement for the day and appearing susceptible to extending a recent downward trend from highs not seen since March 2022.
Recent data on US Initial Jobless Claims indicated some weakness in the US labor market, suggesting that the Federal Reserve may continue to cut interest rates. This has placed the US dollar on the defensive, holding below its highest level since mid-August and providing some support for the GBP/USD pair. However, investors seem to have dismissed the likelihood of more aggressive rate cuts from the Fed, a sentiment reinforced by the September FOMC meeting minutes and stronger-than-expected US consumer inflation figures.
Additionally, ongoing geopolitical tensions in the Middle East are bolstering demand for the safe-haven US dollar, capping potential gains for GBP/USD. Notably, Israel’s military recently announced the elimination of a top commander from the Palestinian militant group Islamic Jihad in the Nur Shams refugee camp in the occupied West Bank. Coupled with growing expectations that the Bank of England (BoE) may accelerate its own rate-cutting cycle, these factors continue to pressure the British pound.
Market participants are now awaiting a series of key macroeconomic data releases from the UK, including monthly GDP figures, which could provide some direction. However, the focus will largely be on the US Producer Price Index (PPI), set to be released later in the North American session. Additional economic indicators, such as the Preliminary Michigan Consumer Sentiment Index and Inflation Expectations, along with speeches from influential FOMC members, are expected to influence USD demand and create short-term trading opportunities in the GBP/USD pair as the week concludes.
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