The Pound Sterling (GBP) is holding onto its recovery from Thursday against major currencies on Friday, although it appears set to record its fourth consecutive week of losses against the US Dollar (USD). However, the near-term outlook for the British currency has improved, bolstered by several favorable factors: hawkish comments from Bank of England (BoE) Monetary Policy Committee (MPC) member Catherine Mann and ongoing economic expansion reflected in the October flash United Kingdom (UK) S&P Global/CIPS Purchasing Managers Index (PMI) data.
During a panel discussion at the International Monetary Fund (IMF) meetings, Catherine Mann—known for her hawkish stance—welcomed the softer inflation figures for September but stressed the necessity for further economic slowdown. Despite a drop in service sector inflation below 5%, she noted that the sector still has considerable ground to cover to align with the BoE’s target of 2%.
Regarding interest rates, Mann stated, “It would be premature to cut rates if you have structural persistence in the relationship between wages and price formation.” Despite her hawkish outlook, market participants are still betting on the BoE reducing interest rates further in November.
Economic Data Highlights
The preliminary PMI report released Thursday indicated that business activity in the UK expanded in both the manufacturing and service sectors, although the pace was slower than in September. While overall growth was below expectations, it still outperformed similar metrics from the United States and Eurozone, where manufacturing output continues to contract.
Daily Digest: Market Movements
The Pound Sterling is trading around 1.2970 against the USD during Friday’s London session. The GBP/USD pair is sustaining the gains from Thursday as the USD remains under pressure following a corrective move, with the US Dollar Index (DXY) hovering near 104.10.
The outlook for the USD remains positive, driven by traders pricing in a potential victory for former President Donald Trump in the upcoming presidential election on November 5. This scenario is perceived as favorable for the Greenback, with expectations of higher tariffs and lower taxes potentially impacting currencies from trading partners. Conversely, Standard Chartered warns that the USD could experience significant shifts if Vice President Kamala Harris wins the election.
Speculation regarding the Federal Reserve’s (Fed) gradual approach to interest rate cuts is likely to limit any corrections in the USD. The CME FedWatch tool indicates expectations for the Fed to implement a 25 basis point rate cut in November and December, following a 50 basis point cut in September.
Upcoming Economic Data
Investors will closely monitor the upcoming US Durable Goods Orders data for September, set to be released at 12:30 GMT. Economists anticipate a 1% decline in new orders for durable goods, following a flat reading in August.
Technical Analysis
The Pound Sterling is currently trading near 1.2970 against the USD, maintaining its rebound after finding buying interest near the lower boundary of a Rising Channel chart formation around 1.2900 on the daily time frame. The near-term trend for the GBP/USD pair remains uncertain as it trades below the 50-day Exponential Moving Average (EMA) at approximately 1.3070.
The 14-day Relative Strength Index (RSI) is positioned below 40.00, indicating active bearish momentum. On the downside, the 200-day EMA around 1.2845 represents a significant support zone for GBP bulls. Conversely, resistance levels are identified near the psychological figure of 1.3000 and the 20-day EMA at approximately 1.3060.
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