GBP/USD Benefits From Softer Dollar After Dovish Fed Remarks

The GBP/USD has surged for the fourth consecutive day following dovish remarks by US Fed officials, suggesting a deceleration in inflation would warrant lower rates.

The pair has posted more than 0.60% gains, with buyers eyeing a test of the August 30 swing high at 1.2746, which could pave the way for GBP bulls to challenge the 1.2800 mark. If sellers drag the spot price below 1.2700, they could remain hopeful of lower prices, though they must reclaim the 1.2600 figure, ahead of 1.2550. At the time of writing, the pair is trading at 1.2685.

The Federal Housing Finance Agency (FHFA) revealed that home prices expanded 6.1% YoY in September. Bank of England Deputy Governor Dave Ramsden commented on Tuesday that monetary policy must remain restrictive to curb inflation, pushing against market participants’ expectations that BoE would slash rates next year.

UK ministers have recently played down grim warnings from the Bank of England about the UK’s economic prospects. Governor Andrew Bailey used an interview, on Monday, to bemoan potential growth being ‘lower than it has been in much of my working life’.

Transport Secretary Mark Harper pointed out that last year Threadneedle Street was predicting the UK would in recession – but that has not come to pass.

BoE predicts a flatlining economy over the next year and a slow improvement to 2026. However, Tories have been critical of the bank’s failure to detect inflationary pressures in recent years.

The OBR downgraded its growth predictions last week, but they remain significantly higher. The Bank expects much lower medium-term growth, leaving the level of output 3.2 per cent lower than their central forecast by the end of their forecast horizon in 2026.