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GBP/USD receives upward support on BoE Governor Bailey’s hawkish comments.
UK Prime Minister Rishi Sunak plans to cut taxes following a decline in inflation.
US Dollar faces challenges on dovish sentiment from the Fed following the softer inflation.
GBP/USD continues to trade higher for the third consecutive session, reinforced by the Bank of England (BoE) Governor Andrew Bailey’s speech at the Henry Plumb Memorial Lecture on Monday. The GBP/USD pair trades around 1.2530 during the Asian session on Tuesday, nearing 11-week highs.
BoE Governor Bailey remarked that while inflation has exceeded the main targets, signs are emerging that runaway prices, particularly in the food sector, are starting to stabilize. He acknowledged that overall inflation surpassed the BoE’s main 2.0% target. Despite UK inflation easing to 4.6% in the latest reading, there is still a significant gap to bridge before returning to the 2.0% target. Governor Bailey cautions that it is certainly premature to “declare victory” over inflation.
United Kingdom (UK) Prime Minister, Rishi Sunak, announced that the government plans to reduce taxes following a decline in inflation ahead of the UK’s autumn budget release. Chancellor of the Exchequer Jeremy Hunt is anticipated to unveil measures aimed at accelerating economic growth, with plans to boost business investment among the key initiatives.
US Dollar Index (DXY) continues to lose ground for the third successive trading session, nearing three-month lows around 103.40. The decline is attributed to increased risk appetite and lower US Treasury yields. This sentiment is fueled by expectations of a less aggressive stance from the Federal Reserve (Fed) following last week’s release of softer inflation figures.
In October, the Consumer Price Index (CPI) in the United States decelerated to 3.2% (YoY), while the core CPI fell to 4.0% (YoY). Market optimism stems from the belief that easing inflationary pressures may lead to a more restrained Federal Reserve. Investors seem to be ruling out a rate hike at the December meeting and anticipating potential rate cuts in 2024.
Traders’ focus will be on key US economic indicators, including Existing Home Sales and the Chicago Fed National Activity Index on Tuesday. Additionally, market participants await insights from the Federal Reserve’s minutes from its recent meeting.
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