GBP/USD Forecast: Bailey Hints At Aggressive Rate Cuts

The GBP/USD forecast shows a sudden spike in bearish momentum after Bank of England governor Bailey’s dovish comments. At the same time, the dollar was firm after private employment figures beat estimates. 

The pound plunged to a two-week low after BoE governor Bailey said the central bank could become aggressive on cuts if inflation behaves well. A more dovish outlook means more rate cuts. Consequently, market participants raised the likelihood of a November rate cut to 90%. 

However, Bailey noted the risk of higher oil prices due to the escalating Middle East tensions. An increase in fuel prices could lead to a spike in inflation that would cause most major central banks to pause. Still, at the moment, it remains only a risk.

On the other hand, the US dollar strengthened on Wednesday after US private employment rose more than expected. The ADP non-farm employment increased by 143,000 in September, above expectations of 124,000. The report suggested a slow approach to rate cuts by the Fed. In a recent speech, Fed Chair Powell noted that the central bank might implement two more cuts this year, each 25-bps. 

However, all eyes are on the nonfarm payrolls report, which could change this outlook. Economists expect the US economy to add 148,000 jobs in September, slightly above the previous month’s increase. On the other hand, the unemployment rate might hold steady at 4.2%. Before this, traders will watch unemployment claims to see the state of the labor market.

 

GBP/USD key events 

  • US unemployment claims
  • US ISM Services PMI

 

GBP/USD technical forecast: Bearish channel breakout

(Click on image to enlarge)

GBP/USD forecast

GBP/USD 4-hour chart

On the technical side, the GBP/USD price has plummeted below the 1.3200 support level. The bearish bias is strong since the price has fallen well below the 30-SMA, At the same time, the RSI trades in the oversold region, indicating massive bearish momentum.

The decline came after the RSI made a bearish divergence with the price. Initially, bulls kept the price in a bullish channel. However, after the RSI showed weakness, bears took over by breaching the SMA and the channel support. If the downtrend continues, the price will soon reach the 1.3051 support level.


More By This Author:

USD/CAD Price Analysis: CAD Rises Wth Oil Supply Concerns
EUR/USD Outlook: German Inflation Data Spurs Brief Rally
USD/CAD Outlook: Oil Slump Gathers Buying Traction

Disclaimer: Foreign exchange (Forex) trading carries a high level of risk and may not be suitable for all investors. The risk grows as the leverage is higher. Investment objectives, risk ...

more
How did you like this article? Let us know so we can better customize your reading experience.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.
Or Sign in with