The Pound Sterling (GBP) traded sideways against its major counterparts during Thursday’s London session as investors awaited the preliminary S&P Global/CIPS Purchasing Managers Index (PMI) data for October, scheduled for release at 08:30 GMT.
Analysts expect the PMI report to indicate moderate expansion in overall business activity. Specifically, manufacturing activity is projected to increase at a slower pace, with the index anticipated to drop to 51.4 from 51.5 in September. Conversely, the Services PMI is expected to grow to 52.2, down from the previous reading of 52.4. Continued signs of economic expansion would suggest a positive outlook for the UK economy.
The outlook for the Pound Sterling appears volatile following comments from Bank of England (BoE) Governor Andrew Bailey, who expressed confidence that inflation is decelerating faster than anticipated. “Disinflation is happening, I think, faster than we expected it to, but we still have genuine question marks about whether there have been some structural changes in the economy,” Bailey stated at an Institute of International Finance event, as reported by Bloomberg.
Bailey’s remarks have fueled speculation of a dovish shift at the BoE. Market expectations suggest that the central bank may cut interest rates in November, with strong confidence for a similar move in December.
In today’s session, BoE Monetary Policy Committee (MPC) member Catherine Mann is set to speak at 13:00 GMT. Mann, known for her hawkish stance, was one of four MPC members who voted to maintain interest rates in August, the only instance this year when the BoE cut its key borrowing rates. Additionally, Governor Bailey will deliver the Mike Gill Memorial Lecture at the US Commodity Futures Trading Commission (CFTC) at 19:45 GMT.
Daily Market Update: Pound Sterling Under Pressure Against USD
The Pound Sterling is nearing a fresh two-month low against the US Dollar (USD), trading around 1.2950 during European hours on Thursday. The GBP/USD pair is under pressure as the USD retains gains due to decreased market expectations for the Federal Reserve (Fed) to reduce interest rates at the remaining policy meetings this year. The US Dollar Index (DXY), which measures the Greenback against six major currencies, is holding near a new 12-week high around 104.50.
According to the CME FedWatch tool, the likelihood of a 50-basis-point rate cut by the year-end has decreased slightly to 68.3% from 71.7% a week ago. Traders are currently pricing in a 25-bps cut in November, but confidence in a similar move for December is not as strong.
Amidst growing uncertainty surrounding the upcoming US presidential election, which is less than two weeks away, the USD’s appeal as a safe haven has strengthened. Recent national polls indicate a tight race between former President Donald Trump and current Vice President Kamala Harris.
In the Thursday New York session, attention will shift to the US preliminary S&P Global PMI data for October, set for release at 13:45 GMT. The Manufacturing and Services PMI figures are expected to show contraction and expansion, respectively, though at a slower rate.
Technical Analysis: GBP/USD Faces Key Support Levels
The Pound Sterling is approaching a critical juncture near the lower boundary of a Rising Channel on the daily chart. If the GBP/USD pair fails to maintain this level, it could encounter significant selling pressure.
The near-term trend for the currency pair has deteriorated, breaking below the 100-day Exponential Moving Average (EMA), currently around 1.2990. The 14-day Relative Strength Index (RSI) has slid to near 35.00, indicating active bearish momentum.
Key support for GBP bulls lies at the 200-day EMA, approximately 1.2845. On the upside, resistance is expected near the psychological level of 1.3000 and the 20-day EMA around 1.3060.
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