- Along with the US presidential elections and Trump's victory, both the Bank of England and the Federal Reserve cut interest rates by 25 basis points last week.
- The GBP/USD currency pair suffered losses last week, reaching a support level of 1.2834, the lowest for the pair in nearly three months, and heading towards a weekly bearish close as investors remained focused on Donald Trump and the Republican Party's unexpected victory in the US elections.
According to the forex market, the GBP/USD exchange rate came under pressure following the outcome of the US elections but regained some of those losses, although its gains did not exceed 1.3010 after the Bank of England cut interest rates by 25 basis points to 4.75%. It quickly returned to a downward correction path. Overall, analysts expect the Bank of England to continue cutting interest rates at a quarterly pace, meaning the next cut is likely to occur in the first quarter of 2025 (at the February meeting). Conversely, the bank is still on track to cut faster than its US counterpart, the Federal Reserve. Although economists widely expect another cut from the Federal Reserve in December, fewer cuts are expected for 2025.
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What will affect the performance of GBP/USD this week?
According to the economic calendar, all eyes will be on US inflation figures. US inflation may have moved sideways at best in October, highlighting the uneven path of easing price pressures in the latest phase towards the Federal Reserve's target. Accordingly, the US core consumer price index, scheduled to be released next Wednesday and which excludes food and energy, is likely to rise at the same monthly and annual pace compared to September readings. The overall US consumer price index may have risen by 0.2% for the fourth month, while the annual measure is expected to accelerate for the first time since March. The US government will also release wholesale inflation figures this week, which may have rebounded after stalling in September. At the same time, earnings growth that continues to outpace inflation is likely to deliver further decent gains in retail sales, in data due out on Friday.
On the monetary policy front, Federal Reserve Governor Christopher Waller is due to speak at a banking conference on Tuesday before the central bank releases its latest survey of senior lenders. Powell is due to attend an event later in the week, while New York Fed President John Williams and Dallas Fed President Lori Logan are also on the calendar.
On the GBP front, Britain will be in the spotlight after the Bank of England cut interest rates last Thursday, which came with a warning about the inflationary impact of the latest budget. Moreover, Bank of England Governor Andrew Bailey is scheduled to deliver a speech on Thursday. Also, wages data on Tuesday may show a slight slowdown in wage growth, providing limited reassurance to policymakers. A Friday release is likely to reveal weaker economic growth in the third quarter to 0.2% from 0.5% in the previous three months, according to economists.
Technical forecasts for the GBP/USD pair today:
According to the performance on the daily chart attached, the downward trend of the GBP/USD currency pair is still ongoing. As mentioned earlier, a break below the 1.3000 level will strengthen the bears' control over the trend and thus prepare to move towards deeper support levels. Technically, the closest of which are currently 1.2860, 1.2770, and 1.2600, which are levels sufficient to push technical indicators towards oversold levels. Conversely, and over the same time frame, the initial trend break will not occur without moving above the resistance of 1.3150. furthermore, the GBP/USD price will continue to move in narrow ranges until the reaction to the announcement of US inflation figures and a package of UK economic data, as well as clarity on the future of the new US administration's policies.
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