The Pound Sterling is losing value against the US Dollar for the fourth straight day, approaching a six-month low of 1.3116. This drop is mainly due to a strong US Dollar, which is supported by less speculation about a soft Federal Reserve policy and positive news regarding a US-China trade deal. Currently, the GBP/USD is slightly higher at around 1.3160 after three days of losses. The US Dollar is facing some pressure as expectations grow for a Federal Reserve rate cut. The CME FedWatch Tool now shows a 71% chance of a rate cut in December, up from 66% just a day before.

Pound Sterling Against The Dollar

In October, the Pound Sterling has fallen over 2% against the US Dollar. Concerns about the UK’s financial situation and hawkish comments from Fed Chair Powell are contributing to this decline. Recently, the GBP/USD pair dropped below the 1.3100 support level for the first time since April. In other currency news, the EUR/USD has hit a three-month low due to the Federal Reserve’s tough stance, while gold has dropped again, going below $4,000. The cryptocurrency market is seeing volatility, with Bitcoin and major altcoins making a comeback after recent losses. Bitcoin’s whitepaper marks its 17th anniversary, highlighting its growth into a serious investment asset. The Pound Sterling is struggling against the US Dollar, hovering around six-month lows at 1.3116. This decline is fueled by persistent concerns over the UK’s financial health; national debt has stayed above 90% of GDP since the early 2020s inflation crisis. This ongoing pressure makes it hard for Sterling to recover. On the other hand, the US Dollar gains from mixed messages from the Federal Reserve. While Fed officials are sounding hawkish, the derivatives market is increasingly predicting a change in policy. The CME FedWatch Tool indicates a 71% chance of a December rate cut, illustrating a significant gap between market expectations and the central bank’s stance.

Tension Between Fed Guidance And Market Expectation

This split arises from economic data we’ve been monitoring closely. Core inflation has been slow to drop below 3%, which justifies the Fed’s tough stance. However, recent non-farm payroll reports reveal a cooling labor market. Traders believe that weak employment could force the Fed to adjust its approach, despite their current statements. Looking ahead, this tension suggests a phase of increased volatility. Options traders might want to adopt strategies that benefit from significant price movements in either direction, as this stalemate is unlikely to continue. The upcoming Bank of England meeting could act as a key trigger for a breakout from this narrow range. This situation primarily revolves around the US Dollar, as the Euro is also dipping to multi-month lows against it. Furthermore, broader risk appetite appears fragile, with the Dow Jones stagnating and major tech stocks like Meta Platforms experiencing declines after recent earnings. This cautious atmosphere in the markets indicates that traders should brace for sharp, defensive moves. Create your live VT Markets account and start trading now.

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