GBPUSD:
The GBP/USD pair is unable to capitalize on Friday’s modest gains and is attracting more sellers at the start of the new week. Spot prices are currently trading around the mid-1,3000s and remain near the one-month low reached last Thursday amid bullish US Dollar (USD) sentiment.
The British Pound (GBP) is being undermined by expectations that the Bank of England (BoE) may accelerate its rate cut cycle. In fact, markets are pricing in a 90% chance that the Bank of England will cut rates in November. Rates were boosted by recent comments from Bank of England Governor Andrew Bailey, who said there is a possibility that the central bank could become more aggressive in cutting rates if more good news on inflation emerges.
Meanwhile, the market’s initial reaction to Friday’s economic releases from the UK and the US faded rather quickly, suggesting that the path of least resistance for the GBP/USD pair lies to the downside. The UK Office for National Statistics (ONS) reported that the UK economy grew by 0.2% in August, indicating a moderate recovery after two months of stagnation in June and July. This was helped by better-than-expected UK manufacturing and industrial production data for August.
In the US, the producer price index for final demand was unchanged in September, rising 1.8% year-on-year. The core index, which excludes the volatile food and energy categories, rose 0.2% from the previous month and 2.8% from a year earlier. The data pointed to a favorable inflation outlook and supported expectations of an additional Fed interest rate cut in November. This may deter dollar bulls from aggressive bets and provide some support to the GBP/USD pair.
Trading recommendation: Trade mainly with Sell orders from the current price level.
Origin: FreshForex
