On Thursday, GBP/USD shows steady growth and is trading around 1.2927, recovering losses from the previous session, when the dollar strengthened after the victory of Republican Donald Trump in the US presidential election. Earlier, Trump promised to tighten trade policy, including a significant increase in duties on imports from the EU and China. The Federal Reserve is expected to cut rates less aggressively compared to the European Central Bank (ECB) and the Bank of England, where the economic slowdown is more noticeable.
Investors are focused today on the meetings of the Fed and the Bank of England, which are expected to reduce rates by 25 basis points to 4.75%. In the UK, the current rate is 5.00% after a 25—point cut in August - the first since 2020. After inflation fell to 1.7% in September, a level not seen since April 2021, further easing was expected, especially against the background of falling gasoline and airline ticket prices. However, the increase in expenses and debt obligations announced recently in the budget caused a revision of analysts' forecasts. Additionally, the slowdown in business activity in October, according to S&P Global UK, reduces the confidence of British companies. The corresponding index dropped to 51.8 points, the lowest value since November last year.
Additional pressure on the pound was exerted by data on the UK construction sector. In October, the business activity index fell to 54.3 points against the projected 56.0. At the same time, the services sector showed a slight increase to 52.0 points, and retail sales, according to the British Consortium of Retailers (BRC), slowed to 0.3%, although expectations were at 1.4%.
On the daily chart, according to the Bollinger band indicator, a slight decrease is noticeable, indicating a moderate expansion of the price range, but trading activity does not keep pace with this movement. The MACD indicator is also declining, maintaining a weak sell signal. Stochastic shows similar dynamics, turning downwards in the middle area.
We are considering long positions when the level of 1.2948 breaks up with a target of 1.3050 and a stop loss at 1.2900.
If the 1.2948 level turns out to be a strong resistance and a breakdown occurs down from the 1.2900 mark, this may be a signal for short positions with a target of 1.2817 and a stop loss at 1.2948.