GBP/USD Price Analysis – Oct 14, 2024
Daily Price Outlook
During the early European session on Monday, the GBP/USD pair is seeing some mild losses, hovering around 1.3060, hitting the intra-day low of 1.3041. The rise in safe-haven flows, driven by increasing geopolitical risks, is lending support to the US dollar and pulling the major pair lower. Investors are keenly awaiting UK employment data scheduled for Tuesday, which could provide insight into the health of the labor market and the future trajectory of interest rates.
On the GBP side, dovish comments from Bank of England Governor Andrew Bailey are also weighing on the currency. He hinted that the central bank might take a more aggressive stance on rate cuts, with markets currently pricing in a 90% likelihood of a rate cut in November. This sentiment is contributing to the downward pressure on the GBP and impacting the GBP/USD pair's performance.
US Dollar Strengthens Against GBP Amid Geopolitical Tensions and Economic Data
On the US front, the broad-based US dollar is gaining strength due to safe-haven flows amid rising geopolitical tensions. This is putting downward pressure on the GBP/USD pair as investors look ahead to key economic data. Investors are closely watching UK employment data set to be released on Tuesday.
Meanwhile, data from the US Bureau of Labor Statistics showed that the annual Producer Price Index (PPI) rose by 1.8% year-over-year in September, slightly down from 1.9% in August but higher than the expected 1.6%. The core PPI, which excludes food and energy, increased by 2.8% year-over-year, beating analysts’ forecasts of 2.7%. On a monthly basis, the overall PPI remained unchanged, while the core PPI rose by 0.2%.
However, the Federal Reserve has shifted its focus from tackling inflation to maintaining a healthy job market, which is part of their dual mandate. However, a stronger-than-expected jobs report for September and reduced expectations for a 50 basis point rate cut in November could boost the USD against the British pound.
Therefore, the strengthening USD, driven by safe-haven flows and economic data, along with reduced rate cut expectations, is likely to exert downward pressure on the GBP/USD pair in the near term.
Impact of Dovish Bank of England Remarks on GBP and Upcoming Economic Data
On the GBP front, dovish comments from Bank of England (BoE) Governor Andrew Bailey are affecting the currency. He indicated that the central bank might take a more aggressive approach to cutting interest rates. Currently, markets are anticipating a 90% chance that the BoE will cut rates in November. The BoE's Monetary Policy Committee (MPC) is scheduled to meet on November 7 to announce their decision on interest rates.
Looking forward, the BoE’s Monetary Policy Committee (MPC) is scheduled to meet on November 7 to make their decision. Ahead of this important event, investors are closely watching UK employment data set to be released on Tuesday. This data could provide valuable insights into the labor market and help shape expectations for the UK’s interest rate outlook.
GBP/USD - Technical Analysis
GBP/USD is trading at $1.30658, up 0.01%, reflecting a neutral yet slightly bullish tone. The pair is currently hovering around the pivot point at $1.30509, which could serve as a crucial level for the next directional move. Immediate resistance stands at $1.30832, followed by higher levels at $1.31051 and $1.31329. A break above these levels could signal more upside potential for the pound, possibly driving it towards $1.31329.
On the downside, the first line of defense is at $1.30217, with additional support at $1.29945 and $1.29659. A drop below $1.30217 could trigger a more bearish sentiment, testing the lower levels, especially if the pound fails to hold above the pivot point.
The 50-day Exponential Moving Average (EMA) sits at $1.30726, serving as a critical resistance level. A failure to break above this EMA could indicate some consolidation, with the pair needing a stronger push to continue the uptrend. The Relative Strength Index (RSI) is currently at 50, reflecting neutral momentum and signaling that the market could swing either way depending on key developments in the coming sessions.
A buying opportunity presents itself above $1.30399, with a target to take profit at $1.31049. Traders should be cautious of downside risks, placing a stop-loss at $1.30085 to mitigate any potential losses from a reversal.
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