- The pound has registered a 3.8% loss for the three months ending in September.
- The BOE opted to maintain interest rates last week.
- British business activity data revealed a more challenging September for companies than initially anticipated.
Today’s GBP/USD outlook is bearish as the dollar stays well bid. Moreover, it registered a 3.8% loss for the three months ending in September.
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On Monday, the pound hit its lowest point against the dollar in six months, as concerns across various asset classes further weakened the currency. Additionally, it had already been affected by the market’s reassessment of the Bank of England’s rate outlook.
Last week, the BOE opted to maintain interest rates, marking the first meeting since December 2021 where they did not raise rates. The central bank cited signs of a slowdown in economic growth.
Before that meeting, market expectations strongly leaned towards a 25 basis point rate hike for 2023, if not at that specific meeting. However, as of Monday, the probability of another rate hike this year stood at approximately 40%.
This drop highlights a reversal of the earlier trend this year. The pound gained strength due to expectations that the Bank of England would continue raising rates for longer than the European Central Bank and the Federal Reserve.
On Friday, following the BOE’s decision, British business activity data revealed a more challenging September for companies than initially anticipated. Notably, the purchasing managers’ index dropped to its lowest level since the pandemic lockdown in January 2021.
GBP/USD key events today
The US will release several reports later today that might cause some volatility in the pair.
- The building permits report.
- The CB consumer confidence report.
- The new home sales report.
GBP/USD technical outlook: Pound breaching 1.2200 support.
On the charts, the GBP/USD price has made fresh lows and is currently on the brink of crossing below the 1.2200 support level. Moreover, the bearish bias on the 4-hour chart is strong. The price has fallen and kept below the 30-SMA since bears took over.
At the same time, the RSI has traded in bearish territory, with the recent move pushing it into the oversold region. If bears close below the 1.2200 support, the price will likely keep descending to the next support. However, there is also the chance of a pullback before this happens, as the price is currently oversold.
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Saqib Iqbal
