GBP/USD, FTSE Forecast: Two trades to watch

GBP/USD rises ahead of a key week with election, BoE & Fed rate decisions

GBP/USD is inching higher amid a weaker USD and ahead of a busy week, with US elections and rate cuts expected from the Federal Reserve and the BoE.

The pound is rebounding after falling last week as the market digested Labor's budget, which brought with it higher taxes, borrowing, and investing. While the market lowered BoE rate cut expectations GBP still fell amid concerns over growth.

Attention will now turn to the Bank of England interest rate decision later this week. The central bank is expected to cut rates by 25 basis points, although the probability of this happening has lowered from last week. BoE governor Andrew Bailey is unlikely to guide for another rate cut this year.

Meanwhile, the US dollar is falling away from a three-month high in nervous trade ahead of tomorrow's election and Thursday's FOMC rate decision

As expectations of a Trump win have lowered on the Polymarket, and the US dollar is falling as the Trump trades unwind slightly.

Meanwhile, the Federal Reserve is expected to cut rates by 25 basis points on Thursday, marking the second straight rate cut after an outsized reduction in September.

Mixed data last week, including a hotter-than-expected core PCE and a weaker-than-expected nonfarm payroll report, haven't materially changed the outlook for the Federal Reserve, which is expected to continue gradually cutting rates.

Looking ahead, US factory orders will be released later today. They are expected to show that orders fell 0.4% Month over Month after falling 0.2% previously. The data will play second fiddle to the election nerves.

GBP/USD forecast – technical analysis

GBP/USD has recovered from a low of 1.2840, pushing back above 1.29 and the rising trendline dating back to mid-May. Buyers need to rise above the psychological level of 1.30 to negate the near-term downtrend. Above here, 1.31 comes into play.

Failure to rise above 1.30 keeps sellers in control, with 1.2840 and the 200 SMA at 1.2810 targets on the downside.

FTSE rises, boosted by energy stocks as OPEC+ delays production increases

The FTSE is gaining, outperforming its European peers, boosted by resource stocks, including Shell and BP, after OPEC delayed its increase in oil production.

OPEC+ agreed on Sunday to keep production cuts in place throughout December. Output had been due to increase by 180,000 barrels a day from next month; however, OPEC pushed back on plans to Increase production over fears of a supply glut, which has weighed on oil prices despite ongoing tensions in the Middle East.

This week's spotlight will be on the US elections, which are likely to influence global markets and could drive sentiment.

The FTSE will also be watching China's standing committee meeting, which is likely to impact the heavyweight mining sector on the FTSE. The meeting could provide more clarity on Chinese stimulus with a further $1.4 trillion worth of stimulus could be unveiled.

Frasers, JD Sports, and Anglo-American are leading the gains, with Shell and Lloyds not far behind.

On the broader 250 index, Burberry has risen almost 10% on reports that Italian Moncler is considering an acquisition offer for the luxury retailer.

FTSE forecast - technical analysis

The FTSE has recovered from the 200 SMA, pushing back above 8150 and back into a familiar range. Buyers will look to retake the 100 SMA at 8250. Above here, buyers will look to target 8325 ahead of 8400.

On the downside, support is at 8150 and below here the 200 SMA comes into play at 8100.

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