Pound Sterling gives up gains against USD as 20-day EMA limits upside

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The Pound Sterling’s recovery against the US Dollar stalls after refreshing a two-week high near 1.2750. The US Dollar is preset to end the week on a negative note. Investors expect the BoE policy-easing cycle will be slower than in the US.

The Pound Sterling (GBP) surrenders its intraday gains after refreshing a two-week high near 1.2750 against the US Dollar (USD) in Friday’s North American session. The GBP/USD pair falls back as the US Dollar rebounds in a thin volume trading day due to the Thanksgiving holidays. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, bounces back after posting a fresh two-week low near 105.60.

However, the US Dollar is on course to end the week with a near 1.5% decline. The correction in the US Dollar started on Monday after United States (US) President-elect Donald Trump nominated seasoned hedge fund manager Scott Bessent to fill the position of Treasury Secretary.

Investors watered down the so-called ‘Trump trades’ after financial market participants regarded Bessent as a “safe pair of hands”. In an interview with the Financial Times (FT) last weekend, Bessent said he will focus on enacting Trump’s tariffs but will be “layered in” gradually, a scenario that would maintain geopolitical steadiness. Also, Bessent preferred to reduce the budget deficit to 3% of Gross Domestic Product (GDP), a move that will maintain fiscal discipline.

Going forward, the US Dollar will be guided by market expectations for the Federal Reserve (Fed) interest rate action in the December meeting and next year. According to the CME FedWatch tool, the probability that the Fed will cut interest rates by 25 bps to the 4.25%-4.50% range in the December meeting is 66%, while the rest supports leaving them unchanged. For 2025, traders price in a 75-bps interest rate reduction by the year-end, Reuters reported.

Daily digest market movers: Pound Sterling trades with caution despite firm BoE gradual rate cut prospects

The Pound Sterling trades cautiously against its major peers on Friday even though investors expect the Bank of England (BoE) to cut interest rates more gradually, given the higher inflation in the United Kingdom (UK) economy, especially in the services sector. UK’s inflation report for October showed that the annual core Consumer Price Index (CPI) – which excludes volatile items – accelerated to 3.3%, … Read More