US index data may support the dollar | 10 October 2024

An event to look out for today:

15:30 GMT+3. USD - Consumer Price Index

GBPUSD:

The GBP/USD pair traded with a slight positive bias around 1.3075 during the Asian session on Thursday, although it lacks bullish confidence and remains within striking distance of the near one-month low reached the previous day.

The US Dollar (USD) is consolidating its recent strong gains to its highest level since 16 August and continues to receive support from rising bets on another 25 basis points (bps) interest rate cut by the Federal Reserve (Fed) in November. These expectations were confirmed by the FOMC meeting minutes released on Wednesday, which highlighted a general consensus that an excessive rate cut would not lead the central bank to stick to any specific pace of rate cuts going forward. As a result, US 10-year government bond yields surpassed the 4% threshold, the highest since 31 July, which continues to support the quid and act as a headwind for GBP/USD.

Meanwhile, dovish remarks from Bank of England (BoE) Governor Andrew Bailey last week suggested that the central bank may be about to accelerate its rate cut cycle. This, in turn, could favour a relative decline in the British Pound (GBP) and limit any significant gains in the GBP/USD pairing. Traders may also prefer to wait for the release of US consumer inflation data, which together with the Producer Price Index (PPI) on Friday could influence expectations for the Fed's rate cut path. This, in turn, will stimulate demand for the US Dollar in the near term and provide meaningful momentum to the currency pair.

Ahead of key data releases on Thursday, traders may capitalise on short-term opportunities thanks to the Bank of England's review of lending conditions. Nevertheless, the aforementioned fundamental backdrop indicates that the path of least resistance for the GBP/USD pair lies on the downside, meaning that any subsequent upward movement could still be seen as a selling opportunity. Spot prices seem poised to extend the recent sharp pullback from the 1.3435 area, or the highest level since March 2022, reached last month.

Trading recommendation: Trade predominantly with Sell orders from the current price level

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