09 Dec 2024

GBP/USD struggles for a firm intraday direction and oscillates in a range on Monday.
Bets for a less dovish Fed act as a tailwind for the USD and cap the upside for the pair.
BoE Governor's predicted four rate cuts in 2025 also warrant caution for the GBP bulls.

The GBP/USD pair begins the new week with a lackluster performance, fluctuating within a limited trading range, remaining below the mid-1.2700s during the Asian trading session. Current spot prices are close to a three-week high, surpassing the 1.2800 threshold reached on Friday; however, the underlying economic conditions suggest a degree of caution for those with bullish positions.

The Nonfarm Payrolls (NFP) report released on Friday indicated a slight increase in the Unemployment Rate for November, reinforcing the belief that the Federal Reserve (Fed) may reduce interest rates in December. Nevertheless, the initial market response was fleeting, as speculation grew that the US central bank might decelerate or pause its rate-cutting strategy in January. This development has contributed to the US Dollar (USD) maintaining its position above a nearly one-month low, which is perceived as a challenge for the GBP/USD pair.

Apart from this, persistent geopolitical tensions, China's economic woes and concerns about US President-elect Donald Trump's impending trade tariffs turn out to be other factors lending support to the safe-haven Greenback. The British Pound (GBP), on the other hand, struggles to lure buyers amid the BANK OF ENGLAND  (BoE) Governor Andrew Bailey's dovish outlook, signaling four interest rate cuts in 2025. This further contributes to capping the upside for the GBP/USD pair as traders now look to the US consumer inflation figures for a fresh impetus.

The crucial US Consumer Price Index (CPI) report, due for release on Wednesday, should offer more cues about the Fed's rate-cut path and guide policymakers' decision at the December meeting. This, in turn, will play a key role in driving the near-term USD demand and help in determining the next leg of a directional move for the GBP/USD pair. In the meantime, BoE Deputy Governor David Ramsden's speech later this Monday might influence the GBP price dynamics and allow traders to grab short-term opportunities