GBP/USD loses its traction and trades below 1.2600 after rising above this level earlier in the day. Nevertheless, the pair's losses remain limited as the US Dollar struggles to find demand following mixed data releases. Markets await FOMC Minutes.
Bearish traders, however, need to wait for a sustained break and acceptance below the 1.2500 psychological mark amid reduced bets that the Bank of England (BoE) will cut rates next month. Data released last week showed that the underlying price growth in the UK gathered speed and accelerated sharply to the 2.3% YoY rate in October. This suggests that the BoE will move cautiously on rate cuts and might offer support to the British Pound (GBP).
Investors now look forward to the release of the FOMC meeting minutes, which will be scrutinized for cues about the future rate-cut path. The attention will then shift to the first revision of the US Q3 GDP growth and the US Personal Consumption Expenditure (PCE) Price Index data later this week. The crucial data will play a key role in influencing the near-term USD price dynamics and provide some meaningful impetus to the GBP/USD pair.
Spot prices, however, manage to rebound a few pips from the daily trough and currently trade around mid-1.2500s, down just over 0.10% for the day.
The underlying bullish sentiment across the global financial markets fails to assist the safe-haven US Dollar (USD) to capitalize on its modest intraday gains, which, in turn, offers some support to the GBP/USD pair. Any meaningful USD depreciation, however, seems elusive amid speculations that US President-elect Donald Trump's expansionary policy will reignite inflation and force the Federal Reserve (Fed) to cut interest rates slowly.
Meanwhile, the initial market reaction to Scott Bessent's nomination as the US Treasury secretary turned out to be short-lived and is evident from a fresh leg up in the US Treasury bond yields. Adding to this, persistent geopolitical risks stemming from the Russia-Ukraine war and the ongoing conflicts in the Middle East should act as a tailwind for the safe-haven Greenback. This, in turn, might keep a lid on any further gains for the GBP/USD pair.
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