Fundamental
Overview
The USD came under pressure
on Friday following the softer than expected US CPI report. The market pricing didn’t change much
as it was already very dovish going into the report, but given the positive
risk sentiment, the greenback remained on the backfoot.
Over the weekend, we got
some very positive comments from US Treasury Secretary Bessent as US-China held
trade talks in Malaysia. It looks like they’ve reached a deal, and we are now just waiting for
the Trump-Xi meeting on Thursday where the two leaders are expected to confirm
the positive developments.
The risk-on sentiment is
expected to weigh on the dollar in the short-term, although Treasury yields
could also erase the drop triggered by Trump’s escalation a couple of weeks
ago. This could create some tension between bullish and bearish drivers, but for
now there’s no strong reason for the dollar to rally amid the lack of key US
data.
The Fed is widely expected
to cut by 25 bps on Wednesday and keep the status quo given the lack of US
data. For this reason, the decision is likely to be a non-event.
On the GBP side, we got
some dovish repricing in interest rate expectations following the soft UK CPI
last week. The data didn’t change much for the upcoming November meeting where
the BoE is expected to keep rates steady, but the market is now seeing the
December meeting as live for a cut.
The market pricing now
shows 17 bps of easing by year-end (was 11 before UK CPI) and 63 bps
cumulatively by the end of 2026 (was 50 bps prior).
GBPUSD
Technical Analysis – Daily Timeframe
GBPUSD daily
On the daily chart, we can
see that GBPUSD is trading right in the middle of the two key levels at 1.3588
and 1.3140. There’s not much we can glean from this timeframe, so we need to
zoom in to see some more details.
GBPUSD Technical
Analysis – 4 hour Timeframe
GBPUSD 4 hour
On the 4 hour chart, we can
see that the price broke the downward trendline to the upside and it’s now
trading near the 1.3360 resistance zone. This is where we can expect the
sellers to step in with a defined risk above the resistance to position for a drop
into the 1.3140 level. The buyers, on the other hand, will want to see the
price breaking higher to increase the bullish bets into the 1.3588 level next.
GBPUSD Technical
Analysis – 1 hour Timeframe
GBPUSD 1 hour
On the 1 hour chart, there’s
not much else we can add here as we are just basically ranging between the
1.3360 resistance and the 1.3308 support. The market participants will likely
keep on playing the range until we get a breakout on either side. The red lines
define the average daily range for today.
Upcoming Catalysts
On Wednesday we have the FOMC policy decision, while on Thursday, we have the
Trump-Xi meeting.