Event to watch today:
21:00 EET. USD - FOMC Rate Decision
GBPUSD:
GBPUSD is trading near 1.3295, close to its lowest levels since early July. The pound is being restrained by weaker signals from the UK labor market and caution ahead of the Bank of England’s decision on Thursday. The market largely expects the policy rate to remain at 3.75%, meaning the British currency would need a more convincing indication that the central bank is prepared to continue tightening monetary policy.
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The domestic backdrop in the United Kingdom remains mixed. Inflation is still above the Bank of England’s target, but weaker demand for workers reduces the risk of a sustained acceleration in wage growth. At the same time, uncertainty surrounding future government spending and how it will be financed is limiting demand for the pound, particularly as investors favor the dollar ahead of the Federal Reserve’s important decision.
The US currency retains an advantage due to elevated yields and expectations of a firmer Federal Reserve stance. The selling scenario would come under pressure if the central bank left rates unchanged and gave the market grounds to reduce expectations of a September increase. Until that happens, the pound’s domestic drivers appear insufficient to outweigh the broader dollar impulse, leaving the downside scenario for GBPUSD as the priority.
Trading idea: SELL 1.3295, SL 1.3330, TP 1.3225
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