GBP/USD rebounds strongly amid Fed rate cut speculations, rises above 1.2700

• GBP/USD rallies to 1.2737, gaining 0.70% following comments from Fed and BoE officials, indicating diverging monetary policies.
• Analysts from Rabobank and Goldman Sachs predict a rise in GBP/USD, with targets of 1.30 and 1.35 respectively over the next year.
• Key economic releases ahead: UK inflation data and Q3 GDP report, alongside US housing data and core PCE, to further influence currency movements.

The GBP/USD snapped two days of losses and rallies during the mid-North American session on Tuesday, gaining more than 0.70% after bouncing off daily lows of 1.2632. The major is exchanging hands at 1.2737, boosted by speculations the US Federal Reserve (Fed) would lower borrowing costs before the Bank of England (BoE).

Sterling rises as markets eye diverging central bank policies and upcoming data

The main drivers in the day had been central bankers crossing the wires. The Atlanta Fed President Raphael Bostic said that he projects two rate cuts next year but in the second half of 2024, adding the US central bank is not urgency to back away from a restrictive policy stance. He expects inflation to continue to come down “slowly and unevenly.”

Earlier, Richmond Fed President Thomas Barkin commented that inflation remains the main focus for the Fed, acknowledging there’s progress on curbing elevated prices. He said the Fed’s forecasts are now guidance, just projections, and added that the Fed could re-focus on its dual mandate.

Across the pond, BoE Sarah Breeden was hawkish, saying that policy “must stay restrictive for extended period” and said that despite the economy moving in the right direction, “our (BoE) job is not done.”

Meanwhile, analysts quoted by Reuters had upward revised the GBP/USD’s scope for the next year. Jane Foley, Head of FX Strategy at Rabobank commented “We see scope for cable to track up to 1.30 on a nine-to-12 month view on rate differentials.”

Goldman Sachs analysts estimate the Pound Sterling to head toward 1.35 a year from now.

Data-wise, the US economic docket featured housing data, which barely moved the financial markets, despite portraying a recovery in the sector. Nevertheless, GBP/USD traders are eyeing the latest inflation figures in the United Kingdom (UK) on Wednesday, followed by Friday’s Q3 GDP report.

Across the pond, the US agenda will announce more housing data, Durable Goods Orders, the final reading of the Gross Domestic Product (GDP) in the third quarter, followed by the Fed’s preferred gauge for inflation, the core PCE.

GBP/USD Technical Levels