GBP/USD, DAX Forecast: Two trades to watch

GBP/USD gives up earlier gains after hotter inflation

UK CPI rose to 2.3% o from 1.7%
The market lowers BoE rate cut expectations through to the end of 2025
GBP/USD trades caught between 1.26 – 1.27

GBP/USD rose following UK CPI data before quickly giving back those gains. The pair is unchanged at 1.2680.

UK CPI rose to 2.3% YoY, up from 1.7% in September and ahead of forecasts of 2.2%. On a monthly basis CPI rose 0.6% ahead of the 0.5% forecast. Core inflation also rose to 3.3%.

UK inflation was hotter than expected in October, creating a headache for the BoE. Higher energy prices were a key factor, as was hotter than forecast services inflation, a marker policymakers are watching closely.

The hotter inflation comes as BoE governor Bailey has already warned that rates may be cut at a slower pace owing to the uncertain outlook for consumer prices after Labour’s Budget.

A December rate cut is not expected, and the BoE will likely cut rates at a more gradual pace next year, lifting GBP while pulling the FTSE lower.

Markets lowered rate cut expectations to just 60 basis points through the end of 2025, down from multiple rate cuts expected just a few weeks ago.

The US dollar is heading higher, recovering after a bout of profit-taking in recent days. A lack of fresh catalysts saw the greenback ease away from its yearly high reached last week

today, the USD is resuming the uptrend, boosted by expectations that the Federal Reserve will cut interest rates at a more gradual pace over the coming year owing to economic resilience and expectations of inflationary policies from Trump.

The market is carefully examining Trump's cabinet selections, particularly the yet-to-be-announced Treasury Secretary position.

The U.S. economic calendar is quiet again today, but fed speakers will be in focus as attention turns to PMI data later in the week.

GBP/USD forecast- technical analysis

GBP/USD found support at the 1.26 round number and the falling trendline dating back to August 2021. The price corrected higher but failed to sustain the move above 1.27 and continues to trade in the familiar range of 1.26 – 1,27. The RSI is below 50, supporting further downside.

Sellers will look to take out the 1.26 support, opening the door towards 1.25.

On the other hand, resistance can be seen at 1.27, a rise above here exposes the 200 SMA at 1.2820.

DAX rises as geopolitical worries ease, Nvidia earnings come into focus

Geopolitical concerns ease
Nvidia is due to report after the close
DAX holds above 19000

The DAX opened higher on Wednesday, recovering from yesterday's sell-off as fears over the Russian-Ukraine conflict eased.

News yesterday that Russia had updated its nuclear policy, lowering the threshold for a nuclear war had hurt risk sentiment. The ramping up of geopolitical tensions came amid ongoing jitters surrounding possible U.S. trade tariffs when Trump takes power next year. Europe is in the firing line on both accounts.

Today, the mood is more upbeat as investors look ahead to new Nvidia earnings after the close in the US. Earnings from the eye darling will be a litmus test for the AI trade, which has helped stocks rally to all-time highs this year.

On the economic calendar, German producer prices fell 1.1% year on year in October after falling 1.4% in September. The reading was in line with expectations and supports the view that the ECB could cut rates by a further 25 basis points in the December meeting.

ECB president Christine Lagarde is due to speak later today.

DAX forecast – technical analysis

The DAX has fallen far from its all-time high of 19,684, breaking below 19,500 and forming a series of lower lows. The price has taken out the 50 SMA but continues to close above support at 19,000. The long lower wick on recent candles suggests that selling demand was weak at the lower levels.

Sellers will need a close below 19,000 and to take out 18,810, the November low, to extend losses to the 100 SMA at 18,750 and the 200 SMA at 18,500.

Should buyers successfully defend the 19,000 level, buyers will look to rise towards 19,500. A rise above here creates a higher high and brings 19684 and fresh record highs into focus.

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

City Index is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.