GBP/USD rises amid a weaker USD, but gains could be limited
GBP/USD is rising towards 1.3230 at the time of writing, supported in part by a weaker U.S. dollar and developments in the UK.
The IMF upgraded its UK growth outlook, saying GDP is set to grow by 1.3% in 2026, an upgrade of 0.5 percentage points from its forecast in April. This comes despite the energy shock unleashed by the Iran war, with the IMF pointing to AI as a driver of stronger growth. It sees the UK emerging as one of the winners in the tech boom.
However, the IMF also warned of further price rises and job losses, and cautioned against state handouts ahead of the budget later this month. Any measures announced by Chancellor John Healey need to be well funded to maintain credibility.
Stronger-than-expected like-for-like retail sales data from the British Retail Consortium and hawkish comments from Bank of England policymaker Megan Greene have also supported sterling. Greene warned that second-round inflationary effects could emerge if the central bank fails to raise rates soon.
Meanwhile, the U.S. dollar is seeing modest profit-taking, pulling back from an 18-month peak reached on Monday.
Still, the downside for the dollar appears limited, given growing expectations that the Federal Reserve will hike interest rates again before the end of the year.
Geopolitical risks also remain in play, with the U.S.-Iran standoff and ongoing fighting involving Iran-backed militias and Saudi Arabia potentially keeping safe-haven flows directed towards the U.S. dollar.
This week, attention will be on U.S. CPI data on Wednesday and PPI data on Thursday for further clues on the Fed’s outlook.
GBP/USD Forecast – Technical Analysis
GBP/USD ran into resistance at 1.3650 before moving lower and finding support around 1.3200. The pair is trading below its 50 and 200 EMAs, consolidating above 1.3200 but below 1.3280.
Sellers will need to break below the 1.3200 support zone to establish a lower low and bring 1.3100 into focus, followed by 1.3000, the psychological level.
Buyers will need to move above 1.3275 to bring 1.3340 into focus. A break above here would turn attention to the 50 EMA at 1.3365, followed by the 200 EMA around 1.3400, where buyers could gain further traction.
Gold rises as Oil, Treasury yields slip, central bank buying remains strong
Gold is heading higher on Tuesday as oil prices slip, helping Treasury yields ease. However, attention remains on tomorrow’s U.S. inflation data for fresh signals on the Federal Reserve’s interest rate outlook.
Oil prices are falling for the first time in almost a week. Elevated oil prices, driven by the conflict in the Middle East, have raised inflation concerns, pushing Treasury yields higher and strengthening the case for restrictive monetary policy.
Higher yields and a stronger U.S. dollar weigh on demand for non-yielding, dollar-denominated gold.
The benchmark 10-year Treasury yield has slipped to 5.19% today as technology stocks in Asia sell off and investors return to safe-haven assets.
Tomorrow’s CPI data will be important for the short-term outlook, followed by Thursday’s PPI report. Hotter-than-expected inflation, particularly in core CPI, could increase expectations for an October rate hike. Markets are currently pricing in just a 19% chance of a Fed hike this month, but still see around an 85% probability of an increase before the end of the year.
Cleveland Fed President Beth Hammack has said the Fed should move quickly towards a more restrictive monetary policy stance to control inflation.
Global gold ETF holdings reached 4,256 tonnes in September, following inflows of $10 billion that month and third-quarter inflows of $31 billion.
However, central bank buying remains supportive. China recorded a 23rd consecutive month of gold purchases in September, adding 23 metric tonnes, its largest monthly purchase in three years. Other emerging-market central banks have also been buying gold to reduce their reliance on U.S. government bonds and the dollar.
Central banks purchased a total of 39 tonnes in August, taking total purchases this year to 170 tonnes. Persistent buying keeps Gold prices supported.
XAU/USD Forecast – Technical Analysis
After falling from $4,700, gold found support around $4,100. The price has moved above the falling trendline as it heads towards $4,200. However, it remains below the 20 and 50 EMAs, suggesting the outlook remains bearish.
Buyers would need to break above $4,200 and the 20 EMA, followed by $4,310 and the 200 EMA, for the outlook to improve. Above here, $4,500 comes into focus.
If gold fails to reclaim $4,200, a retest of $4,100 is possible. A break below this level would establish a lower low, turning attention towards $3,940, the 2026 low.
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