British Pound fell over 0.5% against the Rupee as UK inflation met expectations. The GBP/USD pair hit a 2024 low, driven by the US Dollar’s strength following the Federal Reserve’s 25 bps rate cut and risk-averse market sentiment triggered by the updated SEP. UK consumer prices rose 2.6% YoY in November, while services inflation held steady at 5.0%.
Markets expect the Bank of England (BoE) to maintain rates at 4.75% during today’s meeting, with eight MPC members likely to vote for no change. Money market bets on rate cuts by 2025 remained steady at 57 bps, up slightly from 55 bps. UK 2-year gilt yields dipped 3 bps to 4.41%, and 10-year yields stood at 4.51%, near their 2008 highs.
Rising price pressures, driven by employers’ increased costs due to higher NIC and minimum wages, are adding inflationary concerns. Sterling softened against the Euro, which rose 0.23% to 82.70 pence, following its 2022 low of 82.51 pence last week. However, yield divergence with the Eurozone supports a firm medium-term outlook for the Pound.
Analysts noted accelerating UK wage growth, concentrated in the private sector, as a potential driver for hawkish sentiment within the MPC. Despite this, the BoE’s likely decision to hold rates steady could support the Pound in the short term.
Technical Outlook of British Pound
The pair is expected to trade within the 106–109 range in the near term. Last month, it found support above 105.50 and climbed to a high of 108.51 before retreating to 107.18 last week.
The pair is hovering near crucial support at 106.88. A break below this level could push it lower toward 106.24–105.52 or below. Conversely, holding above 106.88 may trigger a recovery toward 107.80–108.30 this month. The pair remains at a pivotal juncture, with key support and resistance levels shaping the near-term outlook.
The Bank of England is set to deliver its policy outcome today, which could provide further direction for the Pound.
Until then, Happy Trading!
Commodity Samachar Securities
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