Expectations of more aggressive policy softening by the Bank of England undermine the British pound | 11 October 2024

Event to watch out for today:

09:00 GMT+3. GBP - GDP Volume Change

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

GBPUSD:

The Pound-Dollar pair is unable to capitalize on a modest rebound from the 1.3020 area or the one-month low and has been fluctuating in a narrow range during the Asian session on Friday. Spot prices are currently hanging around the mid-1.3000 area, unchanged for the day, and seem vulnerable to a continuation of the recent corrective decline from the highest level since March 2022 reached last month.

US initial jobless claims data released on Thursday pointed to signs of weakness in the US labor market and suggested that the Federal Reserve (Fed) will continue to cut interest rates. This kept the US Dollar (USD) on the defensive below its highest level since mid-August and provided some support for the GBP/USD pair. Nevertheless, investors seem to have already fully appreciated the possibility of more aggressive Fed policy easing. These expectations were confirmed by the minutes of the September FOMC meeting and stronger than expected US consumer inflation data.

In addition, persistent geopolitical risks associated with ongoing conflicts in the Middle East serve as a tailwind for the safe-haven US Dollar and limit GBP/USD growth. From the latest developments: the Israeli army claimed to have killed the top commander of the Palestinian militant group Islamic Jihad in the Nur Shams refugee camp in the occupied West Bank. This, as well as market confidence that the Bank of England (BoE) may be about to accelerate its rate cut cycle, could continue to undermine the British Pound and keep the currency pair under control.

Market participants are now awaiting the release of UK macroeconomic data, including monthly GDP, to provide some momentum. However, the focus will remain on the US Producer Price Index (PPI), which will be released later in the North American session. In addition, on the economic front, the US will release preliminary data on the Michigan Consumer Sentiment Index and inflation expectations. This data, along with the speeches of influential FOMC members, will stimulate demand for the US dollar and allow traders to take advantage of short-term opportunities in the GBP/USD pair on the last day of the week.

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

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