Fundamental Overview
The USD rise stalled last week as the US government shutdown delayed many key US economic reports. The dollar “repricing trade” needs strong US data to keep going, especially on the labour market side, so any hiccup on that front is likely to keep weighing on the greenback. The market pricing is now back to 45 bps of easing by year-end and 110 bps by the end of 2026. This could still be too dovish, but we will need strong data to reprice.
In the absence of the government data, an October rate cut is now seen as a done deal. The reality is that an October cut was never really in question. It’s the December cut that could be priced out in case the data strengthens. We still have three NFP and two CPI reports before the December meeting.
On the GBP side, we haven’t got any meaningful change in the fundamentals. The BoE left interest rates unchanged at the last meeting but slowed the pace of QT. The forward guidance was mostly the same with the focus being more on the inflation side now. The UK continues to have a serious inflation problem with high core CPI, high wages and rising consumer inflation expectations. The market is pricing just 6 bps of easing by year-end and 37 bps by the end of 2026.
GBPUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that GBPUSD bounced on the key swing level at 1.3334 and extended the pullback into the 1.35 handle before consolidating. The sellers will be better off shorting around the 1.3588 resistance to target new lows, while the buyers will have a better risk to reward setup around the 1.3334 support to position for a rally into a new cycle high.
GBPUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we’ve been stuck in a 100-pip range between the 1.34 and 1.35 handles. The market participants will likely keep on playing the range until we get a breakout on either side.
GBPUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, there’s not much else we can add here as the buyers will likely lean on the support to position for a rally into the 1.35 handle, while the sellers will look for a breakout to pile in for a drop into the 1.3334 level next. The red lines define the average daily range for today.
Upcoming Catalysts
On Thursday we have Fed Chair Powell speaking and the US Jobless Claims (if the shutdown is lifted). On Friday, we conclude the week with the University of Michigan Consumer Sentiment report.
