GBPUSD quotes were under strong selling pressure all last week, and on Friday fell below the level of 1.26 for the first time since May. However, on Monday, the bulls managed to reverse the situation and brought the quotes to 1.268. At this level are the lows of August, consolidation above which will open the way for GBPUSD to 1.278. A halt in the dollar’s rally gives other currencies a chance to win back at least some of the losses, and the pound may be among the leaders of this recovery.
According to analysts at Bank of America, the British currency fell solely due to the sharp strengthening of the dollar. There are no other significant factors contributing to the weakening of the pound. Unlike the EU and China, the UK is not in the focus of Donald Trump’s attention in terms of the introduction of import duties. This fact will boost the demand for the pound during dollar corrections, both at the end of this year and in 2025.
In terms of monetary policy, there are also no significant differences between the Fed and the Bank of England. During yesterday’s speech, the representative of the British regulator Megan Green stated about the remaining inflationary risks. These factors prevent the Bank of England from rushing into an interest rate cut cycle.
Tomorrow’s inflation data for October may support a cautious approach to monetary policy easing in the UK. According to a Bloomberg poll, experts expect a sharp rise in price growth from 1.7% to 2.2%. Thus, inflation will once again fail to consolidate at the Bank of England’s target level. As a result, the regulator may decide not to reduce the key rate at the December meeting. Such a scenario will further strengthen the pound and support GBPUSD growth.
The Stochastic indicator on the daily chart of GBPUSD signaled an upward reversal of quotes. With the breakdown of 1.268, the upward movement can quickly bring the quotes to the level of 1.278.
Consider the following trading strategy:
Buy GBPUSD above the level of 1.268. Take profit – 1.278. Stop loss – 1.262.
