CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
☰
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
✖

GBP/USD outlook: BoE gets inflation greenlight and US election nears

Article By: ,  Market Analyst
October 16, 2024 6:19 PM

In reaction to this morning’s release of weaker UK inflation data that has effectively paved the way for the Bank of England to become more aggressive with its rate cuts, the GBP/USD plunged below the 1.30 handle to hit its weakest point since August 20, before bouncing off its lows. However, with the US dollar momentum gathering pace, the risks remain skewed to the downside in so far as the short-term GBP/USD outlook is concerned. The greenback is likely to remain supported as we near the US presidential election, partly because the market will want to factor in a potential win for Donald Trump, as the national lead in the polls that Kamala Harris had enjoyed has been shrinking in recent days. Trump is hawkish on protectionism, and a win for him should be bad news for currencies such as the Chinese yuan, Mexican peso, the euro and to lesser degree the pound.

 

Pound slumps as UK CPI weakens sharply

 

Sterling dropped across the board this morning after the September CPI report missed expectations on all fronts. Not only was the headline CPI print of 1.7% both below the previous reading of 2.2% and the BoE’s target, the closely-monitored services inflation dropped more sharply to 4.9% from 5.6% previously, than 5.2% expected. The Bank of England’s own projection for this aspect of the CPI was 5.5%. So, this was without any question good news in so far as the BoE’s fight against inflation goes. It should now mean two more rate cuts are on the way in November and December, following the initial rate cut on August 1. In fact, the data opens the door for a 50 bps cut in November, given the comments by Governor Andrew Bailey earlier this month when he said the pace of easing could increase should inflation data allow it. However, split Monetary Policy Committee (MPC) may ultimately mean we will only get a 25bps, but there is definitely more room for dovish repricing of UK interest rates in light of the latest inflation data.

 

US dollar extends advance as traders’ focus turn to US presidential election race

 

The US dollar remained on the front foot against other currencies too, most notably the euro with the EUR/USD dropping below the 200-day average today, ahead of tomorrow’s ECB rate decision and US retail sales data. In the US, a light economic data calendar means the focus is turning to politics and the upcoming presidential election. Yesterday, Donald Trump spoke about the Fed’s independence and more to the point, tariffs. He struck a notably hawkish tone on protectionism, specifically taking aim at US car imports from Europe and Mexico. If Trump wins, this should be good news for the US dollar. It is likely that the markets are slowly but surely pricing in the odds of him becoming president again, and some of the dollar buying can be attributed to that.

For more, visit the City Index 2024 US Presidential Election Hub

 

GBP/USD outlook: technical analysis and trade ideas

 

Source: TradingView.com

 

The breakdown below support at 1.3020-1.3050 area (highlight on the chart) is yet another blow to the GBP/USD outlook from a technical point of view, as it further increases the bears’ control. Unless we see the formation of an interim higher high, the path of least resistance will remain to the downside. This week’s high comes in at 1.3103, and this level will now the line in the sand for me in so far as the short-term GBP/USD outlook is concerned. If the bearish trend persists for the cable, the next downside target below the 1.30 handle is around 1.2870, marking the point of origin of the breakout in mid-August. Below that level, 1.2800 is the next nig target where we also have the 200-day average coming into play.

 

 

 

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R

 

How to trade with City Index

You can trade with City Index by following these four easy steps:

  1. Open an account, or log in if you’re already a customer 

    • Open an account in the UK
    • Open an account in Australia
    • Open an account in Singapore

  2. Search for the company you want to trade in our award-winning platform 
  3. Choose your position and size, and your stop and limit levels 
  4. Place the trade

 

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.

© City Index 2024