The sterling pound strengthens against the US dollar as investors anticipate potential interest rate cuts by the Bank of England (BoE) following the Federal Reserve’s actions. Expectations for rate cuts by both central banks are set for June and August policy meetings, respectively.
Alongside speculations regarding the BoE’s rate cut timing, the UK’s 2024 budget announcement also bolsters the Pound Sterling. Chancellor of the Exchequer, Jeremy Hunt, outlined plans to reduce public sector debt and deficit while stimulating economic growth.
Looking ahead, upcoming UK Average Earnings data will offer insights into inflation trends. Strong wage growth could temper rate-cut expectations, further supporting the Pound Sterling.
In the markets, the Pound Sterling extends its winning streak above 1.2700, buoyed by optimism surrounding interest rate outlooks. Jeremy Hunt’s budget announcement aligns with expectations, with measures including a reduction in National Insurance Contributions and growth forecast revisions.
Investors eye the Bank of England’s decisions on rate cuts, with expectations leaning towards a reduction in August. Meanwhile, in the US, slowing labour demand, as indicated by ADP Employment Change and JOLTS Job Openings data, weighs on the US Dollar.
Amidst uncertainty over the Federal Reserve’s rate cut timing, Chair Jerome Powell’s remarks underscore the importance of inflation in policy decisions.
Technically, the Pound Sterling trades close to a monthly high, supported by an upside break of a Descending Triangle pattern. The absence of overbought signals suggests continued upside momentum, with the Relative Strength Index climbing above 60.00.