UK Data Disappoints
The rally in GBP is stalling today after some weaker-than-forecast UK data this morning. The ONS reported that UK GDP fell 0.1% in October, in contrast to the 0.1% increase expected. This marks the fourth consecutive month without growth and has put focus back on near-term BOE easing expectations. Money markets are now pricing a roughly 90% chance of a further .25% cut when the bank meets for its final rate decision of the year next week. Along with the soft GDP reading, data today also showed a further widening of the UK trade deficit which, at £22.5 billion, is now at its highest level since January 2022. The deficit widened significantly from the prior month’s £18.8 billion level and surpassed expectations of an increase to £19.3 billion.
Fed Rate Cut & Expectations
Ahead of the data GBPUSD has been enjoying a stronger week, boosted mainly by the fresh Fed rate cut seen on Wednesday. While the forward guidance issued by the Fed was a little constrained, there is still dovish sentiment with the CME group pricing a roughly 25% chance of a cut in January and a 50% chance of a cut in March. Looking ahead, focus will be on next week’s US labour market data. If we see fresh weakness in those readings, there should be a firmer dovish repricing of the rates outlook, leading USD lower again, keeping cable supported near-term. If data surprises to the upside next week, however, this along with a further BOE cut could see GBPUSD pulling back sharply.
Technical Views
GBPUSD
For now, GBPUSD is stalled at the 1.3434 level, potentially carving out a fresh lower high against the September peak. While this resistance holds, a downturn towards 1.3177 is feasible. If we break higher, however, 1.3592 will be the next resistance to note.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.