- Demand for the dollar increased last week due to geopolitical tensions.
- The US economy added 254,000 jobs, well above the estimate of 140,000.
- Markets estimate a 95% chance of a November Fed rate cut of 25 basis points.
The GBP/USD forecast shows a solid downtrend after Friday’s upbeat US jobs report boosted the greenback. Meanwhile, the pound remained fragile after mixed signals on rate cuts from Bank of England policymakers.
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Demand for the dollar rose last week on geopolitical tensions and better-than-expected US economic data. In particular, the conflict in the Middle East escalated last week after Iran attacked Israel, leading to fears of retaliation.
Meanwhile, in the US, data last week showed a resilient labor market and strong business activity in the services sector. The biggest event was non-farm payrolls, which beat estimates. The US economy added 254,000 jobs, well above the estimate of 140,000.
At the same time, the unemployment rate decreased from 4.2% to 4.1%. Economists expected it to stay at 4.2%. The US central bank has been closely monitoring the labor market and cut rates by 50 basis points to prevent it from deteriorating. Furthermore, market participants have set another significant rate cut in November.
However, this outlook changed on Friday, and markets now have a 95% chance of a 25 basis point cut. The prospect of a gradual Fed easing cycle will support the dollar in the near term.
Meanwhile, the pound fell last week after BoE Governor Bailey said the central bank could cut rates aggressively if inflation eases. On the other hand, the BoE’s chief economist, Hugh Peel, advocated a gradual rate cut.
GBP/USD key events today
Investors are not expecting any key economic reports today. Therefore, the pair could extend the moves on Friday.
GBP/USD Technical Forecast: Bears taking a breather near 1.3051
On the technical side, the GBP/USD price is approaching the 1.3051 support level after a sharp bearish move. The previous bullish trend stalled near the 1.3400 resistance level. Here the bears took control by breaking below the 30-SMA. The new bearish move was strong and impulsive, breaking below solid support levels.
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However, after the sharp decline, the RSI made a bullish divergence with the price. This is a sign that the bears are exhausted. Therefore, the price could recover to retest the 30-SMA resistance level or 1.3251. However, as the bearish bias remains strong, the price could eventually break the support at 1.3051.
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