The Pound Sterling (GBP) is struggling near the key level of 1.3100 against the US Dollar (USD) due to traders diminishing their bets on a large rate cut by the Federal Reserve. The US NFP report for September showed a significant increase in payrolls and wage growth, leading to a strong US Dollar and the US Dollar Index (DXY) near a seven-week high. The upbeat labor market data has prompted traders to unwind bets on a 50 bps rate cut in November, with a quarter-to-a-percentage rate cut more likely.
The ongoing tensions in the Middle East region, particularly between Iran and Israel, have weighed heavily on risk-sensitive assets, including the Pound Sterling. Rising energy prices and the potential disruption in the Oil supply chain due to the Middle East tensions have led to a cautious market sentiment. Additionally, expectations of the Bank of England (BoE) cutting interest rates again in November have also contributed to the weak performance of the Pound Sterling. The upcoming release of the monthly Gross Domestic Product (GDP) and factory data for August will provide further insights into the Pound Sterling’s performance.
Technically, the Pound Sterling is oscillating within Friday’s trading range, struggling to hold the 50-day Exponential Moving Average (EMA) around 1.3110. The GBP/USD pair is facing a make or break situation near the upward-sloping trendline from the December 2023 high. The Relative Strength Index (RSI) suggests a loss of bullish momentum, but the upside trend remains intact. The 20-day EMA near 1.3234 will act as a significant resistance for Pound Sterling bulls, while the psychological level of 1.3000 will provide support on the downside.
The Pound Sterling, as the oldest currency in the world and the official currency of the United Kingdom, is influenced by various factors, with monetary policy being the most crucial. The Bank of England’s decisions on interest rates based on achieving price stability play a significant role in determining the value of the Pound Sterling. Economic indicators such as GDP, Manufacturing and Services PMIs, and employment data also impact the direction of the GBP. Additionally, the Trade Balance, which measures the difference between exports and imports, can affect the strength of the Pound Sterling, with a positive balance strengthening the currency.
In conclusion, the Pound Sterling’s performance against the US Dollar is currently under pressure due to a strong US Dollar driven by upbeat labor market data and growing Middle East tensions. The upcoming economic data releases and the Bank of England’s interest rate decision in November will play a crucial role in determining the Pound Sterling’s direction. Technical analysis suggests that the GBP/USD pair is facing key resistance levels on the upside, while finding support at the psychological level of 1.3000. Overall, the Pound Sterling’s outlook remains uncertain in the face of global economic and geopolitical developments.
