Pound to US Dollar Exchange Rate Forecast, News: BoE Rate Cut Bets Dent Sterling

October 4, 2024 - Written by John Cameron

STORY LINK Pound to US Dollar Exchange Rate Forecast, News: BoE Rate Cut Bets Dent Sterling

The Pound US Dollar (GBP/USD) exchange rate nosedived on Thursday morning, following some dovish remarks from Bank of England (BoE) Governor Andrew Bailey that sent the UK currency reeling.

At the time of writing, GBP/USD traded at $1.3115, having plunged more than 1% since the start of the session.

The Pound (GBP) came under intense selling pressure at the beginning of Thursday's session, as remarks from BoE Governor Bailey heightened expectations for further interest rate cuts.

In an interview with the Guardian, Bailey stated that the central bank might adopt a more ‘aggressive’ stance on rate cuts if UK inflation continues to decline. This position marked a notable shift from his comments last month, in which he had indicated a gradual approach to reducing rates.

The sudden dovish turn sent the Pound tumbling across the board.

At the same time, the safe-haven US Dollar (USD) found solid backing as market sentiment remained risk-averse, driving demand for the currency.

Escalating geopolitical tensions in the Middle East kept markets in the red, with Israel launching a ground offensive into Lebanon and Iran conducting a missile strike on Israel. This unnerved investors and sparked a flight to the safety, thereby boosting the US Dollar.

Moreover, USD also continued to garner investor interest following Wednesday's stronger-than-expected US jobs data, which diminished expectations for another 50bps rate cut by the Federal Reserve in November.

GBP/USD may extend its decline on Thursday afternoon, with the upcoming ISM services PMI poised to show a modest uptick in US service sector activity last month. This data could further boost the US Dollar.

The main event, however, is Friday's non-farm payrolls report. While US jobs growth is anticipated to hold steady in September, potentially having a muted impact on USD, any unexpected results could drive significant volatility in the American currency.

Additionally, Friday morning will feature a speech by BoE Chief Economist Huw Pill. Investors will be keen to see if his comments lean slightly more hawkish, potentially helping to reverse some of the damage to the Pound inflicted by Bailey's recent remarks.

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TAGS: Pound Dollar Forecasts