The Pound Sterling faced a significant sell-off after the UK Office for National Statistics published a softer Consumer Price Index report for September. The annual headline inflation dropped to 1.7%, below the bank’s target of 2%. Traders are now expecting the Bank of England to cut interest rates in the remaining policy meetings this year, as price pressures continue to decelerate.
Market experts were anticipating a slowdown in service inflation due to sluggish wage growth. The UK’s Average Earnings Excluding Bonuses measure rose by 4.9%, the slowest in two years. This slowdown in wage growth is likely to impact consumer spending and push traders to raise bets supporting interest rate cuts in upcoming policy meetings.
The British Pound faced a decline against major currencies, with the strongest performance seen against the Australian Dollar. The Pound weakened against the Euro, US Dollar, Japanese Yen, Canadian Dollar, New Zealand Dollar, and Swiss Franc. This data is important for traders and investors who are closely monitoring the performance of the Pound against other currencies.
The Pound Sterling tested support levels below 1.3000 against the US Dollar, as the Dollar continued to gain strength. Traders priced in moderate interest rate cuts from the Federal Reserve in the remaining policy meetings this year. The US Dollar Index maintained gains near 103.30, with expectations of 25 bps rate cuts in November and December. Strong US economic data in September, such as Nonfarm Payrolls and ISM Services PMI, have reduced fears of an economic slowdown.
In technical analysis, the Pound Sterling slipped below 1.3000 against the US Dollar in New York trading hours. The Cable broke below the four-day trading range of 1.3020-1.3100, adding to bearish sentiment. The near-term trend appears vulnerable, with the 20- and 50-day EMAs sloping downwards. A bearish momentum is indicated by the RSI below 40.00, with the 200-day EMA near 1.2840 as a major support zone for Pound Sterling bulls. Resistance is expected near the 1.3100 level.
In conclusion, the Pound Sterling faced a sharp sell-off after the UK inflation data for September came in weaker than expected. Traders are now anticipating interest rate cuts by the Bank of England in the remaining policy meetings this year. The performance of the Pound against major currencies, especially the US Dollar, is closely watched by investors. Technical analysis indicates a bearish trend for the Pound Sterling, with key support and resistance levels to monitor in the coming trading sessions.
