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GBP/USD is consolidating around the mid-1.3000 area

GBP/USD is consolidating around the mid-1.3000 area | 21 October 2024

21 October 2024, GBP/USD

GBP/USD is consolidating around the mid-1.3000 area

GBPUSD:

The GBP/USD pair has been unable to capitalise on the modest recovery gains recorded over the past two days and has been fluctuating in a narrow range around 1.3050-1.3045 during Monday's Asian session. Spot prices remain close to the one-month low reached last Thursday and are likely to extend the recent pullback from the 1.3435 area, the highest level since March 2022.

The unexpected decline in the UK Consumer Price Index (CPI) to its lowest level since April 2021 and below the Bank of England's (BoE) 2% target has increased the likelihood of an interest rate cut of 25 basis points (bps) at the 7 November meeting. Furthermore, market expectations are that the Bank of England may cut interest rates again in December, which could continue to exert pressure on the British pound. This, along with the bullish sentiment surrounding the US dollar, indicates a negative outlook for the GBP/USD pair.

The market is increasingly confident that the Federal Reserve (the Fed) will continue to moderate rate cuts next year, which is keeping US Treasury yields high and acting as a tailwind for the dollar. Furthermore, geopolitical risks are providing additional support for the US dollar.

In the absence of any market-important economic releases from the UK or the US, the aforementioned fundamental backdrop indicates that the path of least resistance for the GBP/USD pair is downwards. Therefore, any intraday upward movement should be viewed as a potential selling opportunity. However, those with a bearish outlook may wait for a consolidation below the 1.3000 psychological mark before placing new bets and positioning for a decline towards the 100-day simple moving average (SMA) support, which currently sits at around 1.2960.

Trading recommendation: Trading predominantly Buy y orders from the current price level.

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David Johnson
Analyst of «FreshForex» company
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