The GBP/USD outlook shows a rebound from recent lows as market participants await a speech from BoE governor Andrew Bailey. Meanwhile, the dollar remained near a two-and-a-half-month high as markets adjusted their Fed rate cut expectations and awaited the upcoming US elections.

The Bank of England governor is set to speak this week and might drop hints on future policy moves. Therefore, traders will pay close attention to his speech later today. Despite Friday’s upbeat retail sales report, the UK economy has slowed down and is performing poorly compared to the US economy. At the same time, inflation eased below the BoE’s 2% target, prompting market participants to increase rate-cut bets. As a result, UK yields fell, weighing on the pound. 

Meanwhile, despite a slight retreat, the greenback was steady as traders priced a less aggressive Fed easing cycle. Recent economic reports have slowly shifted the outlook for rate cuts from aggressive to gradual. The US economy is holding up well, with the labor market and sales beating forecasts. At the same time, inflation increased more than expected in September, reducing the pressure to cut rates. 

Meanwhile, Fed policymakers have assumed a more cautious tone. Although they expect more rate cuts, the size and pace are unclear. Currently, traders are pricing an 89% chance of a 25-bps rate cut in November. 

Elsewhere, the US presidential election is on the horizon, and bets suggest a Trump win. If Trump wins, his tax and tariff policies might increase inflation and interest rates, increasing demand for the dollar.

GBP/USD key events today

• BOE Gov Bailey Speaks

GBP/USD technical outlook: Double bottom pauses downtrend

(Click on image to enlarge)

GBP/USD 4-hour chart

On the technical side, the GBP/USD price trades between the 30-SMA resistance and the 1.2975 support level. The bias is bearish because the indicators and price action suggest a downtrend. The SMA is above the price, and the RSI is below 50, in bearish territory. 

However, it has made a bearish divergence, indicating that the downtrend might be at its end. Furthermore, the price has made a double bottom at the 1.2975 support level. Therefore, the price might soon break above the SMA to revisit the 1.3100 resistance.

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