GBP/USD Price Analysis – Oct 30, 2024

Daily Price Outlook

During the European trading session, the GBP/USD currency pair continued its downward trend, trading sluggish around the 1.2976 level on Wednesday. This is because traders are watching closely for the United Kingdom's Autumn Forecast Statement, set to be announced at 12:45 GMT.

This marks Labour's first budget presentation in over 15 years, with Chancellor of the Exchequer Rachel Reeves expected to propose tax increases on various income sources and outline plans for higher spending to boost investment.

This could undermine the GBP as investors react negatively to such measures, fearing they could lead to slower economic growth or increased debt levels. This could contribute to further weakness in the GBP/USD pair

On the flip side, the losses in the GBP/USD pair may ease as the US dollar weakens ahead of important US economic data. The ADP Employment Change report for October and the Q3 flash GDP data will be released around 12:30 GMT, which could further impact the currency pair.

US Economic Data and Its Impact on GBP/USD Pair

On the US front, the broad-based US dollar turned bearish ahead of important economic data. As a result, the GBP/USD pair gained slightly, with investors focused on the upcoming ADP Employment Change report for October.

This report is expected to show that the private sector added 115,000 new jobs, down from 143,000 in September. However, the slowdown in job growth could worry investors about the job market, leading to increased expectations for interest rate cuts by the Federal Reserve.

Meanwhile, Tuesday’s JOLTS Job Openings data for September raised concerns about slowing job demand, as the number of new job openings was lower than expected. Investors are also looking ahead to the US Nonfarm Payrolls (NFP) data for October, which will be released on Friday, to gain more insights into the labor market.

Hence, the US economy is expected to grow steadily at a rate of 3.0% in the third quarter of the year, showing some resilience despite challenges in the job market.

Impact of UK Autumn Forecast Statement on GBP/USD Pair

Moreover, many investors are cautious about making strong moves ahead of the United Kingdom's Autumn Forecast Statement, which will be announced at 12:45 GMT.

This will be Labour’s first budget presentation in over 15 years. Chancellor of the Exchequer Rachel Reeves is expected to announce tax hikes on various income sources and outline plans for increased spending to boost investment.

According to UBS, the budget will focus on three main areas: changes to fiscal rules to allow more borrowing, a package of tax increases on capital gains, inheritance, pensions, and national insurance contributions for employers, and additional spending on investment projects.

Market participants are particularly interested in the details of the tax increases and spending plans, as these could affect inflation. Analysts at UBS believe that higher spending will likely raise the fiscal deficit to 3.1% of GDP.

This higher deficit could raise concerns about ongoing price pressures, leading traders to reconsider their expectations for the Bank of England’s (BoE) interest rate decisions for the rest of the year.

According to a recent Reuters poll, the BoE is expected to cut interest rates by 25 basis points in its upcoming meeting on November 7, bringing key borrowing rates down to 4.75%.

Therefore, the cautious investor sentiment and potential tax hikes in the UK may weaken the GBP/USD pair, as concerns over higher fiscal deficits could dampen confidence in the pound, especially if the Bank of England cuts interest rates as expected.

GBP/USD – Technical Analysis

GBP/USD is trading near the $1.29990 level, showing a slight decline and hovering just below the key pivot point at $1.30154. Immediate resistance lies at $1.30312, followed by stronger resistance at $1.30493 and $1.30644.

The Relative Strength Index (RSI) stands at 56, hinting at moderate bullish momentum but not yet in overbought territory. Additionally, the 50-day Exponential Moving Average (EMA) is positioned at $1.29753, offering a nearby support level that could reinforce bullish sentiment if tested.

A sustained move above the $1.30154 pivot could spark buying interest, potentially driving the pair toward $1.30493 and beyond. However, if prices fall below immediate support at $1.29947, traders may see further downside risk toward $1.29793 and $1.29587.

For those seeking a buying opportunity, an entry above $1.29895 with a target at $1.30320 and a stop loss near $1.29562 aligns with the current technical setup, balancing risk with potential upside. GBP/USD is positioned near its pivot with a mildly bullish outlook, with buyers likely stepping in above $1.30154.

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