- Putin warned the US of a lower threshold for a nuclear strike.
- Economists expect UK inflation to rise by 2.2% in October.
- The dollar remained steady after gaining over 1.6% last week.
GBP/USD price analysis points to a sudden rush into safe-haven assets that has weakened the pound against the dollar. Meanwhile, the Trump trade kept the greenback near recent highs as markets awaited economic data for clues on the Fed’s rate cut.
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Markets panicked on Tuesday after Russian President Vladimir Putin warned the US of a lower threshold for a nuclear attack. This news came in response to Ukraine’s recent attack on Russia with US missiles. If Russia goes nuclear, it could escalate the war in Ukraine and affect the global economy.
After Putin’s warning, investors dumped risky assets like the pound and bought the yen and dollar. Meanwhile, market participants awaited a report on UK inflation that could provide an indication of future BoE policy moves. Economists expect inflation to rise by 2.2% after rising 1.7% in the previous month.
Meanwhile, services inflation could further ease to 4.3%. Lower services inflation could reignite bets for a rate cut at the December meeting. On the other hand, if inflation is higher than expected, the pound will rise as bets on a rate cut decline.
Meanwhile, the dollar was steady after gaining over 1.6 percent last week amid Trump trade. The upcoming policy changes in the US have changed the outlook for Fed rate cuts. At the same time, policymakers took a more hawkish tone, boosting the dollar. The Fed is increasingly likely to take a break in December.
GBP/USD key events today
There will be no key reports from the US or UK. Therefore, traders will follow the developments in the Ukrainian war.
GBP/USD Price Technical Analysis: Downtrend continues after SMA retest
From the technical side, GBP/USD price bounced lower after retesting the 30-SMA resistance. After the consolidation, the bears took control by breaking the key support level at 1.2850. Furthermore, the price made a sharp swing below the SMA, indicating a steep downtrend.
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At the same time, the RSI entered the oversold region, indicating solid bearish momentum. However, it has made a bullish divergence that could lead to a deeper pullback or reversal. On the other hand, if the bearish momentum builds, the price will break below 1.2600.
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