The GBP/USD pair continues to trade below the 1.3000 psychological mark during the Asian session on Thursday, currently positioned near its lowest level since August 20. The prevailing fundamental backdrop appears to favor bearish traders, suggesting that the path of least resistance for the pair is tilted to the downside.
Key Economic Data
Recent data released on Wednesday showed that the annual UK Consumer Price Index (CPI) fell from 2.2% in August to 1.7% in September, marking the lowest reading since April 2021. This decline has fueled speculation regarding a potential interest rate cut by the Bank of England (BoE) in November, thereby undermining the British Pound (GBP).
US Dollar Strength
The US Dollar (USD) has rallied to its highest level since early August, reinforcing the negative outlook for the GBP/USD pair. Market sentiment now leans towards the belief that the Federal Reserve (Fed) will implement modest interest rate cuts over the coming year, which keeps the yield on the benchmark 10-year US government bond above the 4% threshold. This environment continues to support the USD, particularly as ongoing geopolitical tensions in the Middle East enhance the Greenback’s status as a safe haven.
Technical Analysis
From a technical standpoint, the overnight breakdown below a one-week-old trading range and sustained trading below the 1.3000 psychological barrier lend further credence to the bearish sentiment. This opens the door for potential follow-through weakness towards the 100-day Simple Moving Average (SMA) support near the 1.2955 region, with the next significant target being the 1.2900 mark.
Upcoming US Economic Releases
Traders are now looking ahead to key US macroeconomic releases that could provide further impetus during the early North American session. Thursday’s economic docket includes:
Retail Sales Report: Expected to provide insights into consumer spending trends.
Weekly Initial Jobless Claims: A key indicator of labor market health.
Philly Fed Manufacturing Index: A measure of manufacturing activity in the Philadelphia region.
Industrial Production Data: Offers a glimpse into the overall industrial output.
These releases, alongside US bond yields and geopolitical developments, are likely to drive USD demand and create short-term trading opportunities around the GBP/USD pair.
The GBP/USD pair remains under significant pressure due to a confluence of weak UK inflation data, a strengthening US Dollar, and ongoing geopolitical risks. Traders will closely monitor upcoming US economic data for potential market movements, while the bearish sentiment could lead to further declines in the GBP/USD exchange rate.
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