GBPUSD:
The pound is supported by the broader weakening of the U.S. dollar and the stabilization of market expectations regarding the Fed’s next steps. Domestic news has also helped: discussion of budget plans with an emphasis on strengthening revenue and restraint on spending supported a decline in gilt yields and reduced the risk premium. The external backdrop—softer dollar index and moderate decline in U.S. Treasury yields—adds to demand for GBP.
U.K. macro data remain mixed: slower wage growth is easing inflationary pressure, allowing the Bank of England to proceed toward cautious easing without haste. At the same time, inflation in the U.K. remains among the highest in the G7, which keeps expectations for aggressive rate cuts in check. Taken together, this gives the pound a tactical edge versus the dollar in the near term as long as U.S. yields remain contained.
Key risks for GBP include upcoming inflation and consumer activity releases as well as details of the November budget: tougher fiscal measures could temporarily cool business activity but strengthen confidence in the fiscal path. In the short run, the balance of factors favors further upside in the pair thanks to a softer dollar and improved perception of U.K. assets.
Trading recommendation: BUY 1.3425, SL 1.3375, TP 1.3525
Origin: FreshForex
