- GBP/USD is continuing to gain momentum on a hawkish tone from BoE authorities.
- BoE Chief Economist Huw Pill emphasized the importance of staying firm in the fight against inflation.
- The United States Dollar is weakening on speculation that the Fed may relax its financial policy in 2024.
GBP/USD is trading around 1.2500 during the Asian session on Monday as it aims to extend its gains for the third consecutive session. The upward momentum of the GBP/USD pair has been supported by the hawkish tone of Bank of England’s (BoE) authorities.
BoE Chief Economist Huw Pill, in a Financial Times (FEET) interview on Friday, mentioned that the central bank will remain firm in its fight against inflation and emphasized the importance of maintaining tight financial policy. Additionally, BoE Governor Andrew Bailey’s recent hawkish comments underscored the need for higher rates for an extended period.
The GBP/USD pair also benefited from positive PMI data from the United Kingdom (UK) released on Thursday. The UK business activity showed signs of a turnaround, with the initial S&P Global/CIPS Services and Composite PMIs expanding in November after three consecutive months of contraction. The Services PMI and Composite PMI returned to the expansionary zone, defying expectations of stagnation.
Although the Manufacturing PMI showed improvement, it still remains below the growth threshold. On the consumer front, GfK Consumer Confidence for November declined lower than expected.
The United States Dollar Index (DXY) continues to decline despite the improvement in United States Treasury yields. The 10-year United States bond yield has increased for the fourth consecutive session, standing at 4.49% at the time of press.
Amid speculation that the United States Federal Reserve (Fed) may relax its financial policy next year, recent comments from Fed officials have added nuance to the narrative. While there is speculation about potential policy easing, Fed officials have indicated the need for further tightening, stressing that decisions will depend on incoming data and highlighting the importance of analyzing economic indicators to take appropriate action in addressing inflation concerns.
Although today lacks any high-impact data release from the United Kingdom, market participants will likely focus on the speeches from Bank of England (BoE) officials. In the United States (US) docket, key indicators to watch include Gross Domestic Product Annualized (Q3), Core PCE – Price Index, and the ISM Manufacturing PMI.
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