- The UK economy expanded by 0.2%, coming in line with economists forecasts.
- The CPI report in the US revealed that inflation was higher than expected in September.
- US unemployment claims rose more than expected, indicating a weaker labor market.
The GBP/USD price analysis shows a small rebound in the pound after data revealed growth in the UK economy. Meanwhile, the dollar hovered near yesterday’s peaks after inflation numbers came in higher than expected.
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Data on Friday revealed that the UK economy expanded by 0.2%, coming in line with economists forecasts. However, investors maintained bets for a Bank of England rate cut during the November meeting.
Meanwhile, the CPI report in the US revealed that inflation was higher than expected in September. On a monthly basis, consumer prices increased by 0.2%, above forecasts of 0.1%. Meanwhile, annually, prices increased by 2.4%, above estimates of 2.3%. The unexpected jump led to a decline in Fed rate cut expectations, boosting the US dollar.
However, unemployment claims rose more than expected, indicating a weaker labor market. The mix of data put bets for a 25-bps November Fed rate cut at 80%. At the same time, market participants are pricing a 20% chance that the Fed will keep rates unchanged.
The next major report will be the Producer Price Index. Economists expect wholesale inflation to increase by 0.1%, down from 0.2% in August. If wholesale inflation also beats forecasts, rate cut expectations will keep falling.
Meanwhile, markets are paying close attention to Middle East tensions. The likelihood of a ceasefire between Israel and Hezbollah eased fears of escalation. However, there is still a risk of retaliation after Iran attacked Israel.
GBP/USD key events today
- US Core PPI m/m
- US PPI m/m
GBP/USD technical price analysis: Bearish momentum fades near 1.3051 support
On the technical side, the GBP/USD price remains in a tight consolidation near the 1.3051 support level. The bias is bearish because the price sits slightly below the 30-SMA. At the same time, the RSI trades below 50, supporting bearish momentum.
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However, the RSI has made a bullish divergence, indicating weakness in the downtrend. If it plays out, the price might break above the 30-SMA, showing a bullish reversal. A break above the SMA would allow GBP/USD to revisit the 1.3201 level.
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