GBP Rises on Strong Data and BoE Support, While Fed and ECB Decisions Loom Large.

• The British Pound has strengthened due to better-than-expected economic data and growing optimism around the new Labour government, with Bank of England’s Andrew Bailey supporting continued restrictive policies to control inflation.
• Economists anticipate one more 25 basis point rate cut from the Bank of England this year, according to a Reuters poll.
• The GBP/USD pair is approaching a 29-month high of 1.3266, driven by renewed US Dollar selling and the differing monetary policy outlooks between the US Federal Reserve and the Bank of England.
• The pair’s future movement depends on upcoming US Q2 GDP and key inflation data, which could influence the Federal Reserve’s decision on a potential rate cut on September 18.
• The Euro faces uncertainty as ECB member Klaas Knot awaits more data before deciding on a potential rate cut, with markets expecting the ECB to lower borrowing costs next month amid easing inflation and economic concerns in the Eurozone.

GBP: The British Pound has been bolstered by stronger-than-expected economic data in recent months and growing confidence in the new Labour government. Comments from Bank of England’s Andrew Bailey also lend support, as he emphasized the need to maintain restrictive policies until inflation risks are fully under control. Economists, according to a Reuters poll, expect one more 25 basis point rate cut from the BoE this year.

USD: The GBP/USD pair is edging back toward the 29-month high of 1.3266, aided by renewed US Dollar selling despite a risk-off environment following disappointing guidance from Nvidia. The differing monetary policy approaches between the US Federal Reserve and the Bank of England continue to favor the GBP/USD uptrend. However, the pair’s further movement will depend on the upcoming US Q2 GDP second estimate and Friday’s key inflation data, which investors hope will signal a continued easing of inflation, potentially paving the way for a rate cut by the Fed on September 18.

EUR: On Wednesday, ECB Governing Council member Klaas Knot indicated that he is awaiting more data before deciding on a potential rate cut in September. Markets, however, anticipate the ECB will lower borrowing costs next month due to easing inflation and an uncertain economic outlook. The Eurozone’s Harmonized Index of Consumer Prices flash estimate is due Friday, with expectations of a decline in headline inflation to 2.2% YoY in August from 2.6% previously, and core CPI inflation dropping to 2.8% YoY from 2.9%. A hotter-than-expected result could boost the Euro and limit the downside for EUR/GBP.

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