Pounds to Dollars Update: Hits 30-Month High as Fed Kicks Off Cutting Cycle

September 19, 2024 - Written by John Cameron

STORY LINK Pounds to Dollars Update: Hits 30-Month High as Fed Kicks Off Cutting Cycle

The Pound US Dollar (GBP/USD) exchange rate reached a 30-month peak on Thursday, driven by the Federal Reserve’s dovish interest rate decision.

At the time of writing, GBP/USD is trading at approximately $1.3288, marking a 0.6% increase for the day.

US Dollar (USD) Plunges following Jumbo Fed Rate Cut

The US Dollar (USD) came under selling pressure on Thursday following the Federal Reserve's interest rate decision the previous evening.

The Fed kicked off its rate-cutting cycle with a significant half-point cut at its September meeting, aligning with market expectations but still sending the US Dollar into a tailspin. The currency briefly plummeted to a 30-month low against the Pound (GBP).

Despite an initial recovery, the 'Greenback' resumed its downward trend during Thursday's European trading session, hitting a new low against Sterling.

Pound (GBP) Rises as BoE Holds Steady

Meanwhile, the Pound gained strength on Thursday after the Bank of England (BoE) wrapped up its latest monetary policy meeting, opting to maintain interest rates at their current level.

Although the decision was widely anticipated, there had been some uncertainty following the Federal Reserve's 50 basis point rate cut the night before. Nevertheless, eight out of nine members of the BoE's Monetary Policy Committee voted to keep rates unchanged, citing persistent inflationary pressures.

This more hawkish stance bolstered the attractiveness of the British currency.

GBP/USD Exchange Rate Forecast: Positive UK Sales Data to Support Sterling?

In the final session of the week, GBP investors will be closely watching the UK's August retail sales numbers.

Experts anticipate that sales grew by 0.4% last month, slightly lower than the 0.5% increase seen in July. This steady growth would suggest that consumers are spending healthily, which could strengthen the Pound and make it less likely that the Bank of England will cut interest rates heavily in the future.

Across the Atlantic, there's a lack of significant data releases from the US. This could make the safe-haven US dollar sensitive to shifts in market sentiment. If investors continue to feel optimistic after the Federal Reserve's large rate cut, the 'Greenback' might remain under pressure.

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TAGS: Pound Dollar Forecasts