- US CPI rose 0.3% in September, beating forecasts for a 0.2% gain.
- Market participants estimate a 91% chance of a November Fed rate cut of 25 basis points.
- US producer prices were unchanged in September, compared with expectations for a 0.1% increase.
The GBP/USD forecast shows indecision as market participants absorb recent US inflation data. The dollar remained steady after interest rate cut bets fluctuated last week amid mixed US economic numbers.
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After a sharp fall, the pound remained in a tight consolidation as traders adjusted to falling expectations of a Fed rate cut. Last week, data from the US showed a jump in consumer inflation. CPI rose 0.3% in September, beating forecasts for a 0.2% increase. The unexpected increase followed the release of the monthly jobs report, which deflated expectations for another 50 basis point rate cut in November. Accordingly, the dollar strengthened as markets changed the outlook for Fed policy.
Currently, market participants estimate a 91% chance of a 25 bps rate cut plus a slight chance of a pause. Initially, bets fell to 80% before rising after a poor wholesale inflation report.
Producer prices remained unchanged in September compared to expectations of a 0.1% increase. This was consistent with the view that inflation will soon reach the Fed’s target. Therefore, the central bank is likely to cut in November. However, as more data becomes available, this probability will constantly change.
Meanwhile, the UK economy grew by 0.2% in August after stagnating. However, as the figure met forecasts, the pound barely rose. This week, markets will focus on retail sales data from the US and UK, which will show the state of consumer spending. This is likely to affect the outlook for monetary policy in both countries.
GBP/USD key events today
The pair could continue to consolidate as no key reports come out of the US or UK.
GBP/USD Technical Forecast: Price shows indecision near 1.3051
On the technical side, the GBP/USD price is trading between the 30-SMA resistance line and the 1.3051 support level. Meanwhile, the RSI is trading below 50, indicating solid bearish momentum. However, despite the clear bearish bias, the RSI made a bullish divergence, showing that the downtrend has weakened.
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Therefore, if bears emerge, they could take control with a break above the SMA. On the other hand, if the bears regain momentum, the downtrend will continue with a new low below 1.3051.
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