The GBP/USD currency pair has continued its upward trend, marking its fifth straight session of gains and trading around 1.3350 during Tuesday’s Asian trading hours. This performance keeps the pair close to its recent peak of 1.3359, achieved on Monday, which is the highest level in over 31 months.
The potential for the US Dollar to weaken is gaining traction as market participants anticipate further interest rate cuts from the US Federal Reserve as early as 2024. Current analysis suggests a 50% chance that the Fed may implement a significant reduction of 75 basis points by year-end, which would adjust the federal funds rate to a target range of 4.0-4.25%. Influential Fed officials have indicated that additional cuts are likely, albeit more gradual than those enacted in previous months.
On the data front, recent statistics show that the S&P Global US Composite PMI showed a slight decline in growth for September, recording a figure of 54.4 compared to 54.6 in August. Notably, the Manufacturing PMI fell unexpectedly to 47.0, signaling a contraction, while the Services PMI saw modest growth, rising to 55.4.
In the UK, the manufacturing sector also experienced a downturn as the preliminary Manufacturing PMI dropped to 51.5 in September, down from 52.5 the previous month and falling short of market forecasts. The Services PMI similarly decreased to 52.8, missing its projected figures as well. Analysts have suggested that while a slowdown in output growth is evident, it should not be viewed as an overly alarming trend.
Adding to the economic landscape, the UK Prime Minister has raised alarms about the potential need for significant economic reforms due to persistently high inflation levels, suggesting that the domestic economy could face tough challenges ahead.
