Daily Price Outlook
The GBP/USD currency pair failed to stop its declining streak and experienced a two-day decline, trading around 1.2380 during the European session on Monday. However, this decline is driven by upcoming interest rate decisions in the US and the UK, which are making traders cautious. In the US, the Federal Reserve is expected to maintain current interest rates in its upcoming meeting, but there is a possibility of slight rate increases later in 2023, strengthening the US dollar (USD) and putting pressure on GBP/USD.
Conversely, the Bank of England (BoE) is anticipated to raise UK interest rates slightly in its upcoming meeting, potentially boosting the British pound (GBP) while also introducing market uncertainty.
Influence of Central Banks and Economic Data on GBP/USD
It is worth noting that the US Federal Reserve (Fed) is likely to keep interest rates unchanged in its upcoming meeting on Wednesday. Investors are keenly watching for any hints about future rate changes. However, the market is currently factoring in a 0.25% rate increase by the end of 2023. Although, the USD faced some pressure due to disappointing US consumer sentiment data. The preliminary Michigan Consumer Sentiment Index for September was 67.7, lower than the previous 69.5 and the expected 69.1.
Hence, the news of the likely unchanged interest rates from the US Federal Reserve and the weaker US consumer sentiment data have the potential to put downward pressure on the USD, which could support the GBP/USD pair.
Factors Affecting GBP/USD Traders
Another factor influencing GBP/USD traders is the expectation that the Bank of England (BoE) will raise interest rates by 0.25% in its upcoming Thursday meeting. The BoE aims to combat rising inflation and maintain UK economic stability. However, BoE Governor Andrew Bailey's recent statement suggests that the bank may be nearing the end of its rate-hike cycle.
This, coupled with concerns about a potential recession and signs of a slowing UK job market, might push the BoE to reconsider future rate hikes. Investors will also closely monitor key economic data like the Consumer Price Index (CPI), Core CPI, and Producer Price Index (PPI) for August, set to be released on Wednesday.
Looking forward, traders will keep a close eye on US Building Permits data. These releases could provide trading opportunities within the GBP/USD pair, as they offer insights into the US housing market's health and can influence currency movements.
GBP/USD - Technical Analysis
The GBP/USD pair has reaffirmed its downward trajectory, consolidating beneath the 1.2400 threshold. This strengthens the forecast for an ongoing primary bearish trend, paving the way towards our primary anticipated target of 1.2310.
The current bearish channel meticulously frames the projected downtrend, which receives consistent reinforcement from the EMA50. It's important to highlight that a breach of 1.2435 could propel the price towards challenging the crucial resistance at 1.2505 before embarking on another bearish maneuver. Today's anticipated trading parameters are set between a support of 1.2300 and resistance at 1.2450.
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