- The governor of the Bank of England could give hints about future policy moves.
- The dollar was steady as traders appreciated a less aggressive Fed easing cycle.
- Bets on the US presidential election suggest a Trump victory.
The GBP/USD outlook shows a recovery from recent lows as market participants await BoE Governor Andrew Bailey’s speech. Meanwhile, the dollar remained near a two-and-a-half-month high as markets adjusted their expectations of a Fed rate cut and awaited the upcoming US election.
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The governor of the Bank of England is due to speak this week and could give hints about future policy moves. That’s why traders will be paying close attention to his speech later today. Despite Friday’s upbeat retail sales report, the UK economy has slowed and is performing poorly compared to the US economy. At the same time, inflation fell below the BoE’s 2% target, prompting market participants to increase bets on a rate cut. As a result, UK yields fell, weighing on the pound.
Meanwhile, despite the slight pullback, the dollar was steady as traders appreciated the Fed’s less aggressive easing cycle. Recent economic reports have slowly shifted the outlook for rate cuts from aggressive to gradual. The US economy is holding up well, with the labor market and sales beating forecasts. At the same time, inflation rose more than expected in September, reducing downward pressure on rates.
Meanwhile, Fed policymakers took a more cautious tone. While they expect more rate cuts, the size and pace are unclear. Currently, traders estimate an 89% chance of a 25 bps rate cut in November.
Elsewhere, the US presidential election is on the horizon, with betting tips suggesting a Trump victory. If Trump wins, his tax and tariff policies could increase inflation and interest rates, increasing demand for the dollar.
GBP/USD key events today
GBP/USD Technical Outlook: Double bottom halts downtrend
From the technical side, GBP/USD price is trading between the 30-SMA resistance and the 1.2975 support level. The bias is bearish as indicators and price action suggest a downtrend. The SMA is above the price and the RSI is below 50, in bearish territory.
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However, it made a bearish divergence, indicating that the downtrend may be over. Furthermore, the price made a double bottom at the 1.2975 support level. Therefore, the price may soon break above the SMA to revisit the resistance at 1.3100.
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