GBP/USD Forecast: Pound Sterling Holds above 1.32 ahead of Fed Minutes

– Written by


David Woodsmith

STORY LINK GBP/USD Forecast: Pound Sterling Holds above 1.32 ahead of Fed Minutes

The Pound US Dollar (GBP/USD) exchange rate moved modestly higher on Tuesday as a brighter mood across financial markets reduced demand for the safe-haven US Dollar.

At the time of writing, GBP/USD was trading at around $1.3239, having edged up slightly from Tuesday’s opening level.

Demand for the US Dollar (USD) eased on Tuesday as investors became more willing to move into riskier assets.

Wall Street’s technology-led rally helped lift broader market sentiment, while a retreat in oil prices offered further reassurance after elevated energy costs had contributed to recent concerns over inflation and global growth.

Despite Tuesday’s pullback, USD remained close to multi-month highs.

The US Dollar Index was hovering around 102.2 after gaining almost 1% during the previous week, while elevated US Treasury yields continued to provide the currency with a degree of underlying support.

Sterling (GBP) traded within a relatively narrow range on Tuesday morning as investors awaited comments from Bank of England (BoE) policymaker Catherine Mann.

Mann was one of three Monetary Policy Committee (MPC) members to vote for an immediate 25-basis-point rate increase at September’s meeting.

Her latest remarks could therefore attract considerable attention from GBP traders.

Any indication that she continues to favour higher borrowing costs could strengthen expectations for a November hike and provide another lift for Sterling.

Near-Term GBP/USD Forecast: Fed Minutes to Offer Fresh Policy Clues

Wednesday’s release of the minutes from the Federal Reserve’s September meeting is likely to provide the next significant catalyst for the Pound US Dollar (GBP/USD) exchange rate.

Investors will be looking for clues about how much support there is within the central bank for additional interest rate increases.

An especially hawkish set of minutes could revive some expectations for tighter policy, although a return to firm October hike bets appears unlikely.

Should the minutes instead reinforce the possibility of a December increase, the US Dollar could find some support.

Sterling’s gains may remain limited in the meantime, with traders likely to adopt a cautious stance ahead of Thursday’s busy schedule of BoE speakers, including Governor Andrew Bailey.

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TAGS: Pound Dollar Forecasts