Key Takeaways
- GBP/USD is trading in a narrow range around 1.3350 ahead of US CPI data release.
- Traders anticipate a higher US inflation rate for September, expecting 3.1% YoY.
- Growing confidence in Federal Reserve rate cuts this year is impacting the US Dollar.
- Market sentiment for the Bank of England has notably shifted towards further rate cuts.
- UK gilt yields have decreased due to increased dovish bets on the Bank of England.
GBP/USD Hovers Ahead of US Inflation Data
The British Pound Sterling (GBP) is currently trading within a limited range against the US Dollar (USD), hovering around the 1.3350 mark during Thursday’s European trading session. The GBP/USD pair is consolidating as market participants await the release of the United States Consumer Price Index (CPI) data for September, which experienced delays due to the government shutdown.
At the time of reporting, the US Dollar Index (DXY), a measure of the dollar’s strength against six major currencies, recorded a 0.2% increase, nearing 99.10. The DXY has rebounded following a corrective movement on Wednesday.
💡 The upcoming US inflation figures are expected to significantly influence the US Dollar, especially given that many economic data releases have been postponed due to the ongoing federal shutdown.
The US headline inflation, as measured by CPI, is forecasted to have accelerated its year-over-year growth to 3.1% in September, up from the previous 2.9%. Core inflation is also projected to see a steady increase of 3.1%. On a monthly basis, both headline and core CPI are estimated to have risen by 0.4% and 0.3%, respectively.
📊 Traders are increasingly convinced that the Federal Reserve will implement interest rate cuts at its remaining monetary policy meetings this year. The CME FedWatch tool indicates a 96% probability that the Fed will reduce interest rates by 25 basis points (bps) in both its upcoming policy meetings, scheduled for later this month and in December.
Market Movers and Bank of England Sentiment
The Pound Sterling is showing mixed performance against its major currency counterparts on Thursday. However, the outlook for the British currency has become less certain as traders are raising their bets on additional interest rate cuts by the Bank of England before the end of the year.
A report from Reuters indicates that interest rate futures are pricing in a 78% chance that the Bank of England will cut its Bank Rate by 25 basis points to 3.75% before the year concludes. This is a significant increase from the approximately 46% probability observed early Wednesday.
⚡ The acceleration of dovish expectations for the Bank of England follows the release of the United Kingdom’s CPI data for September on Wednesday, which suggested that price pressure growth is nearing its peak. The Bank of England had indicated in its September monetary policy meeting that inflationary pressures were expected to peak around 4% in the current month.
According to the UK inflation report, core CPI, which excludes volatile items like food and energy, increased at a slower pace of 3.5%, compared to 3.6% in August. Meanwhile, headline inflation maintained a steady growth rate of 3.8%.
📍 The heightened dovish sentiment surrounding the Bank of England has exerted downward pressure on short-term UK gilt yields. Notably, 10-year yields have fallen to near 4.37%, marking the lowest level observed in ten months.
📌 Looking ahead, market participants will be closely watching the UK Retail Sales data for September and the preliminary S&P Global UK-US Purchasing Managers’ Index (PMI) data for October, both scheduled for release on Friday.
🌎 On the global stage, trade tensions between the United States and China have intensified. The US is reportedly planning to impose restrictions on software-powered exports to China, effective November 1. Officials from the White House have cautioned that this plan could encompass a broad range of products, as everything imaginable is made with US software.
Pound Sterling Performance Today
The table below illustrates the daily percentage change of the British Pound (GBP) against key global currencies. The Pound Sterling demonstrated its strongest performance against the Japanese Yen today.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.12% | 0.05% | 0.44% | -0.01% | -0.36% | -0.17% | 0.20% | |
| EUR | -0.12% | -0.07% | 0.34% | -0.13% | -0.46% | -0.29% | 0.08% | |
| GBP | -0.05% | 0.07% | 0.39% | -0.05% | -0.40% | -0.22% | 0.15% | |
| JPY | -0.44% | -0.34% | -0.39% | -0.47% | -0.79% | -0.64% | -0.25% | |
| CAD | 0.01% | 0.13% | 0.05% | 0.47% | -0.33% | -0.16% | 0.21% | |
| AUD | 0.36% | 0.46% | 0.40% | 0.79% | 0.33% | 0.18% | 0.56% | |
| NZD | 0.17% | 0.29% | 0.22% | 0.64% | 0.16% | -0.18% | 0.37% | |
| CHF | -0.20% | -0.08% | -0.15% | 0.25% | -0.21% | -0.56% | -0.37% |
This heatmap displays the percentage changes of major currencies against each other. The base currency is selected from the left column, and the quote currency from the top row. For example, selecting the British Pound from the left column and moving across to the US Dollar shows the percentage change for GBP (base) against USD (quote).
Technical Outlook for GBP/USD
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The Pound Sterling is currently trading within Wednesday’s range against the US Dollar, situated around the 1.3350 level. The near-term trend for the GBP/USD pair appears uncertain, as it is trading below the 20-day Exponential Moving Average (EMA), which is positioned at approximately 1.3404.
📊 The 14-day Relative Strength Index (RSI) is hovering near the 40.00 mark. A sustained drop below this level could signal the emergence of fresh bearish momentum.
📍 Key support for the pair is identified at the August 1 low of 1.3140. Conversely, the psychological level of 1.3500 is expected to act as a significant resistance barrier on the upside.
Final Thoughts
The GBP/USD pair remains sensitive to upcoming US inflation data, while market sentiment shifts lean towards further Bank of England rate cuts. Technical indicators suggest a period of consolidation with key levels to watch for potential breakouts.