Pound Sterling Seeks Stability Amid BoE`s Gradual Rate Cut Signals by Amit Gupta, Kedia Advisory
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The Pound Sterling is holding gains against most major currencies, except the US Dollar, following Bank of England (BoE) Governor Andrew Bailey's recent comments. After a 25 bps rate cut, Bailey highlighted a cautious approach to future cuts, stating rates would lower gradually if the economy aligns with forecasts. However, he reiterated the BoE's commitment to a restrictive stance to mitigate inflation risks. The GBP/USD pair trades near 1.3000, facing resistance with the 200-day EMA support at 1.2860. Key technical indicators suggest that while there's near-term bearish momentum, a breakout above 1.3000 could alter the trend.
Key Highlights
Pound Sterling gains broadly, weakens only against the US Dollar.
BoE cut rates by 25 bps to 4.75%, signaling gradual cuts ahead.
Governor Bailey emphasizes maintaining restrictive policy for inflation.
GBP/USD faces resistance at 1.3000, support at 1.2860 on Friday.
UK fiscal measures expected to boost growth despite higher taxes.
The Pound Sterling demonstrated resilience on Friday, showing strength against most global currencies, though it slipped against the US Dollar. This comes after Bank of England (BoE) Governor Andrew Bailey’s less dovish-than-expected statements following Thursday’s 25 basis-point rate cut, which brought the key rate down to 4.75%. Bailey emphasized that, while future cuts may happen gradually, the BoE will keep monetary policy restrictive until persistent inflation risks abate.
In terms of technical performance, GBP/USD remains within a critical region, positioned just below 1.3000, a key psychological level and near the breakdown region of a Rising Channel pattern. Despite rebounding from an 11-week low at 1.2830, the pair's movement remains capped by the 20-day and 50-day EMAs, now in a downtrend around 1.3000 and 1.3035, respectively. However, the pair is supported by the 200-day EMA at 1.2860, which provides a crucial cushion against further declines.
Other market signals offer mixed views on near-term movements. The 14-day Relative Strength Index (RSI) holds close to 40, suggesting a potential bearish continuation if it breaks lower. Bailey’s comments on the UK’s fiscal measures indicate that increased government spending could boost growth, possibly offsetting the impact of high taxation.
Finally
The GBP/USD pair must hold above 1.2800 to maintain bullish potential, with resistance at 1.3000 remaining a key challenge for further upside movement.
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