GBP/USD, Oil Forecast: Two trades to watch

GBP/USD falls ahead of UK inflation & jobs data this week

• US trades at a 2-month high against its major peers
• GBP has fallen in October after dovish BoE Bailey's comments
• UK inflation & employment data are due this week
• GBP/USD holds above 1.30

GBP/USD is edging lower on U.S. dollar strength at the start of the week due to looming geopolitical risks and expectations of a more gradual pace to Fed rate cuts.

Data last week showed that US inflation cooled less than expected to 2.4%. PPI was at 1.8% in September, paving the way for a 25-basis-point rate cut in the November meeting.

Fed officials are shifting their focus from inflation to keeping the jobs market healthy, another component of the dual mandate.

Today is Columbus Day in the US, and the bond market is closed, so dollar volumes could be low.

Meanwhile, the pound is still struggling following dovish remarks from Bank of England governor Andrew Bailey at the start of the month. He said that the UK central bank may become more aggressive in cutting rates if inflation allows it.

UK inflation data is due later this week and is expected to show that CPI fell below 2% to 1.9%. Meanwhile, UK employment data is due on Tuesday. Sticky wage growth and high service sector inflation have been hurdles for England to cut rates more aggressively.

The market is pricing in a 90% probability that the Bank of England will cut rates in November.

GBP/USD forecast – technical analysis

GBP/USD has corrected lower from a 2024 high of 1.34, falling below 1.31 and the 50 SMA. It would take a break below 1.30 for the pair to form a lower low, changing the structure of the chart. Below 1.29, the rising trendline support comes into play, and the 200 SMA is at 1.2790.

As long as 1.30 support holds, buyers could look to retake the 50 SMA at 1.31. Above here, 1.3260, the August high comes into focus.

Oil falls as China demand concerns overshadow Middle East supply worries

• China's stimulus announcement lacked key information
• Chinese CPI eased to 0.4%
• Middle East supply concerns remain
• Oil failed to rise above the 200 SMA.

Oil prices are falling lower after two weeks of gains, fueled by rising concerns over the demand outlook in China, the world's top crude oil importer.

China's finance minister held a conference over the weekend to outline more spending plans. However, the conference missed out on details on the size and timing of the stimulus package, disappointing the market.

Meanwhile, China's inflation unexpectedly cooled further in September, rising 0.4% YoY, down from 0.6%. Wild PPI in China shaded deeper deflation, dropping 2.8% YoY.

Over the past week, the consumption and delayed demand environment in the world's largest economy has overshadowed concerns over escalating tensions in the Middle East and news that the US expanded sanctions against Iran's petroleum and Petrochemical sector last week.

The market remains on edge, waiting for Israel's response to Iran's missile attacks last week amid concerns it could target oil infrastructure.

Later today, OPEC is expected to release its monthly oil report, which could shed more light on the demand and supply outlook.

Oil forecast – technical analysis

Oil recovered from the October low of 67.50, rising above the near-term falling trendline before running into resistance at the 200 SMA. The price has corrected lower but remains neutral while it holds above 72.50.

Sellers need a break below 72.50 and 71.50 support zones to extend losses back towards 67.5.

Buyers will look to rise above the 200 SMA at 77.25 to bring 80.00 the psychological level back into play.