• The Pound Sterling remains under pressure against its peers amid uncertainty ahead of BoE’s monetary policy announcement.
• BoE dovish bets accelerate due to slowing UK job growth.
• The US Dollar demonstrates strength amid easing Fed dovish bets.

The Pound Sterling (GBP) trades cautiously against its peers at the start of the week. The British currency is expected to remain volatile amid uncertainty surrounding the Bank of England’s (BoE) interest rate policy, which will be announced on Thursday.

Traders see a one in three chance that the BoE will cut interest rates by 25 basis points (bps) to 3.75%, according to a Reuters report. BoE dovish expectations have accelerated lately due to slower-than-projected United Kingdom (UK) Consumer Price Index (CPI) growth seen in September and signs of moderating labor demand reflected by the employment data for the three months ending August.

In the September policy meeting, the BoE also stated that inflationary pressures would peak around 4% this month.

Meanwhile, think tanks of the market have become divided over the BoE’s monetary policy decision on Thursday. Analysts at Goldman Sachs now expect the BoE to cut interest rates by 25 bps to 3.75% on Thursday, while ING anticipates the UK central bank to hold rates steady with a 5-4 vote split.
 

Daily digest market movers: Pound Sterling trades sideways against US Dollar

• The Pound Sterling consolidates around 1.3140 against the US Dollar (USD) during the European trading session on Monday. The GBP/USD pair turns sideways after finding a temporary floor near an over six-month low around 1.3100 posted on Friday. The pair is expected to remain under pressure as the US Dollar trades firmly due to receding Federal Reserve (Fed) dovish expectations for the December policy meeting.
• At the time of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades firmly near the three-month high of 99.85 posted on Friday.
• According to the CME FedWatch tool, the probability of the Fed cutting interest rates by 25 basis points (bps) to the 3.50%-3.75% range in the December meeting has eased to 69.3% from 94.4% a week ago.
• Fed dovish expectations have cooled down significantly following comments from Fed Chair Jerome Powell in the press conference on Wednesday, signaling that the central bank has no significant plans to cut interest rates in December.
• Powell stated that the December cut is “far from a foregone conclusion”, clarifying that there were “strongly different views” in the meeting, and the takeaway is that “we haven't made a decision about December", Bloomberg reported.
• Meanwhile, comments from a few Fed officials on Friday showed that they are concerned over upside inflation risks, with price pressures remaining well-above the central bank’s 2% target.
• “Need to maintain some restriction to bring down inflation,” Cleveland Fed Bank President Beth Hammack said at a conference hosted by the Fed Bank of Dallas on Friday.
• In Monday’s session, investors will focus on the US ISM Manufacturing Purchasing Managers’ Index (PMI) data for October, which will be released at 15:00 GMT. The Manufacturing PMI is expected to come in at 49.2, marginally higher than 49.1 in September. However, a figure below 50.0 is considered a contraction in the business activity.
   

Technical Analysis: Pound Sterling finds cushion near 1.3100
 

(Click on image to enlarge)

The Pound Sterling finds temporary support against the US Dollar near an over six-month low at around 1.3100 posted on Friday. The outlook of the Cable remains bearish as it trades below the 200-day Exponential Moving Average (EMA), which is around 1.3290.

The 14-day Relative Strength Index (RSI) slumps to near 30.00, indicating that the overall momentum is bearish.

Looking down, the psychological level of 1.3000 will act as a key support zone. On the upside, the October 28 high around 1.3370 will act as a key barrier.

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