GBP/USD Price Analysis – Nov 04, 2024
Daily Price Outlook
During the European trading session, the GBP/USD currency pair maintained its upward trend and remained well-bid around the 1.2961 level and reaching an intraday high of 1.2999. However, the upward trend can be attributed to the US Dollar's strong decline ahead of the upcoming presidential election on Tuesday.
As a result, the Pound Sterling is gaining strength against the Dollar and other major currencies. Investors are also focused on the Bank of England’s monetary policy decision expected on Thursday, which could further impact the cable pair performance.
US Dollar Weakness and Its Impact on GBP/USD Exchange Rate
On the US front, the broad-based US dollar failed to sustain its bullish trend and turned bearish on Monday as the US Dollar Index (DXY) dropped to around 103.60, its lowest level in almost two weeks.
However, this decline was triggered by a recent poll from the Des Moines Register/Mediacom Iowa Poll, which showed Democratic candidate Kamala Harris gaining three points over former President Donald Trump in Iowa. Many national polls indicate a close race between the two candidates, creating uncertainty in the market.
Besides the election, investors are also looking to the Federal Reserve’s (Fed) policy announcement on Thursday. The Fed is expected to cut interest rates again, but this time by a smaller amount of 25 basis points, following a larger cut of 50 basis points in September. Investors will be particularly attentive to the Fed’s comments about future rate decisions, especially for the December meeting.
Therefore, the bearish trend of the US dollar could strengthen the GBP/USD pair as the Pound gains against a weakening Greenback. Meanwhile, uncertainty surrounding the election and potential Fed rate cuts may further support the Pound’s upward momentum against the Dollar.
Impact of Bank of England's Monetary Policy on GBP/USD Pair
On the GBP front, the upticks in the GBP/USD pair could be further boosted by the Bank of England's (BoE) monetary policy decision expected on Thursday. However, the BoE is anticipated to cut interest rates by 25 basis points, bringing them down to 4.75%.
Notably, Monetary Policy Committee (MPC) members are mostly in favor of a rate cut, with seven expected to support it, while two, including external member Catherine Mann, prefer maintaining rates at 5%.
Investors will closely watch BoE Governor Andrew Bailey’s press conference following the policy decision for insights into future actions, especially for December.
Moreover, UK Chancellor of the Exchequer recently announced £40 billion in new taxes, the highest since 1993, along with various investment projects aimed at boosting public spending. The Office for Business Responsibility (OBR) has also raised current-year inflation targets to 2.5% from the previous 2.2%.
Therefore, the anticipated rate cut by the Bank of England could strengthen the GBP/USD pair, as a lower interest rate may encourage investment in the Pound. However, the uncertainty around inflation targets and government policies could also create volatility in the exchange rate.
GBP/USD – Technical Analysis
The GBP/USD pair is trading at $1.29868, up 0.56% for the day, as it hovers around a key pivot level at $1.29954. This pivot point will be critical in determining the pair’s next move. Immediate resistance is positioned at $1.30108, followed by further resistance at $1.30262 and a higher target at $1.30431.
A break above these levels could indicate renewed bullish momentum, particularly if GBP/USD sustains above the 50-day Exponential Moving Average (EMA) of $1.29315. With the Relative Strength Index (RSI) reading at 64, the pair is close to overbought territory, signaling that the upside may be limited unless there’s a decisive move past the resistance zone.
On the downside, immediate support lies at $1.29674, with additional layers at $1.29473 and $1.29274. Should the pair drop below $1.29674, selling pressure could increase, pushing GBP/USD toward the 50 EMA, which acts as a significant support barrier.
Market sentiment is closely tied to ongoing dollar strength and investor sentiment around the Bank of England’s interest rate outlook, which could influence GBP demand.
For traders, a breach below the pivot at $1.29954 could trigger selling interest, targeting $1.29531. However, a sustained push above $1.30108 would shift the outlook to bullish, with $1.30431 as an upper target in the short term.
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