GBP/USD Price Analysis – Oct 23, 2024
Daily Price Outlook
During the European trading session, the GBP/USD currency pair maintained its upward momentum, holding strong around the 1.2995 level. This is quite impressive, especially given the typically bullish US dollar, which tends to push prices down.
However, the Pound Sterling (GBP) found support following comments from Bank of England Monetary Policy Committee member Megan Greene. She shared a slightly hawkish perspective on interest rates during her discussion with the Atlantic Council at the IMF meeting on Tuesday. This was seen as a key factor that kept the GBP/USD pair higher.
Looking ahead, traders are keeping a close eye on the upcoming flash S&P Global/CIPS Purchasing Managers Index (PMI) data for October, set to be released on Thursday. Meanwhile, the expectations are for the PMI report to show modest growth in overall business activity, which could further influence market sentiment.
Pound Sterling Strengthens on Hawkish BoE Outlook Amid Upcoming Key Speech
As we mentioned, the British currency has gained traction right after hawkish comments from Bank of England (BoE) Monetary Policy Committee member Megan Greene. During a discussion with the Atlantic Council at the International Monetary Fund (IMF) meeting, Greene provided a slightly hawkish outlook on interest rates.
She emphasized the need for monetary policy to continue addressing inflation to meet target levels. When asked if the recent decline in UK inflation would affect her vote in November, Greene noted that the drop was influenced by volatile factors and suggested she wouldn’t rely too heavily on this data.
It's important to remember that Greene was one of the four MPC members who voted to keep interest rates unchanged in August when the BoE reduced rates by 25 basis points to 5%. Moving ahead, the next key event for the Pound Sterling will be BoE Governor Andrew Bailey’s speech scheduled for 18:45 GMT.
Investors will be keen to hear his insights for clues on potential monetary policy changes in November and December. Meanwhile, traders are already anticipating another interest rate cut in November, which could further influence the Pound's performance.
Therefore, the Pound's strengthening due to Megan Greene's hawkish comments may bolster the GBP/USD pair. If BoE Governor Bailey's upcoming speech suggests a more cautious stance on rate cuts, it could support the Pound further, enhancing its value against the US dollar.
US Dollar Strengthens Amid Election Uncertainty, Pressuring GBP/USD
On the US front, the broad-based US dollar has been gaining strength, putting pressure on the Pound Sterling, which is struggling to stay above the psychological resistance level of 1.3000 against the US dollar during Wednesday's London session. This increase in the dollar's appeal as a safe haven comes amid uncertainty surrounding the upcoming US presidential elections on November 5.
However, recent polls show Vice President Kamala Harris with a slight lead over former President Donald Trump, raising concerns among investors. Market participants are worried that if Trump wins, it could lead to higher tariffs, negatively affecting exports from key trading partners such as the Eurozone, Canada, Mexico, China, and Japan.
Moreover, expectations for a gradual easing of Federal Reserve policies this year and into 2025 have further boosted the dollar's appeal. The International Monetary Fund (IMF) has also raised its growth forecast for the US in 2023 to 2.8% from 2.6% previously, along with increasing GDP projections for 2025 to 2.2%.
Therefore, the strengthening US dollar, driven by election uncertainties and higher growth forecasts, places downward pressure on the GBP/USD pair.
GBP/USD – Technical Analysis
Technically, GBP/USD is trading just below its pivot point of $1.30087, indicating a potential for range-bound price action in the short term. Immediate resistance is noted at $1.30716, with higher resistance levels at $1.31246 and $1.31760. A move above $1.30716 could push the pair toward these higher resistance levels, but momentum appears to be fading.
On the downside, immediate support is found at $1.29495, with subsequent support at $1.28987 and a deeper level at $1.28242. A breach below $1.29495 would likely signal increased selling pressure, potentially leading to a more significant correction toward the lower support zones.
The Relative Strength Index (RSI) is at 44, suggesting a lack of strong directional bias as the pair remains in neutral territory. Meanwhile, the 50-day Exponential Moving Average (EMA) at $1.30268 indicates that GBP/USD is struggling to break back above critical resistance, which reinforces a slightly bearish outlook for the near term.
For traders, a short position may be considered if GBP/USD drops below $1.30252, with a take-profit target at $1.28981 and a stop-loss at $1.30761 to manage potential upside risks.
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