- BoE Governor Bailey said the central bank could become aggressive on tapering if inflation falls.
- US ADP nonfarm payrolls rose by 143,000 in September.
- Economists expect the US economy to add 148,000 jobs in September.
The GBP/USD forecast shows a sudden spike in bearish momentum following dovish comments from Bank of England Governor Bailey. At the same time, the dollar was firm after private employment figures beat estimates.
–Are you interested in learning more about Canadian forex brokers? Check out our detailed guide-
The pound fell to a two-week low after BoE Governor Bailey said the central bank could become aggressive in tapering if inflation behaved well. Better looks mean more rate reductions. Accordingly, market participants increased the probability of a November rate cut to 90%.
However, Bailey pointed to the risk of rising oil prices due to the escalation of Middle Eastern tensions. A rise in fuel prices could lead to a spike in inflation that would cause most major central banks to pause. However, at this point it remains only a risk.
On the other hand, the US dollar strengthened on Wednesday after US private sector employment rose more than expected. ADP nonfarm payrolls rose by 143,000 in September, beating expectations for 124,000. The report suggested a slow approach to interest rate cuts by the Fed. In a recent speech, Fed Chairman Powell noted that the central bank could make two more cuts this year, each by 25 basis points.
However, all eyes are on the non-farm payrolls report, which could change this outlook. Economists expect the U.S. economy to add 148,000 jobs in September, slightly higher than the previous month’s increase. On the other hand, the unemployment rate could remain stable at 4.2%. Before that, traders will monitor jobless claims to see the state of the labor market.
GBP/USD Key Events
- US unemployment claims
- US ISM Services PMI
GBP/USD Technical Forecast: Channel Break in Bears
On the technical side, the GBP/USD price has fallen below the 1.3200 support level. The bearish bias is strong as the price has fallen well below the 30-SMA. At the same time, the RSI is trading in an oversold region, indicating massive bearish momentum.
–Are you interested in learning more about social trading platforms? Check out our detailed guide-
The decline occurred after the RSI made a bearish divergence with the price. Initially, the bulls held the price in a bullish channel. However, after the RSI showed weakness, the bears took control by breaking through the SMA and channel support. If the downtrend continues, the price will soon reach the support level of 1.3051.
Do you want to trade Forex now? Invest in eToro!
68% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing money.
