Home GBP/USD Forecast: Bailey Hints at Aggressive Rate Cuts
Majors

GBP/USD Forecast: Bailey Hints at Aggressive Rate Cuts

  • BoE governor Bailey said the central bank could become aggressive on cuts if inflation falls.
  • The US ADP non-farm employment increased by 143,000 in September.
  • Economists expect the US economy to add 148,000 jobs in September.

The GBP/USD forecast shows a sudden spike in bearish momentum after Bank of England governor Bailey’s dovish comments. At the same time, the dollar was firm after private employment figures beat estimates. 

Are you interested in learning more about Canada forex brokers? Check our detailed guide-

The pound plunged to a two-week low after BoE governor Bailey said the central bank could become aggressive on cuts if inflation behaves well. A more dovish outlook means more rate cuts. Consequently, market participants raised the likelihood of a November rate cut to 90%. 

However, Bailey noted the risk of higher oil prices due to the escalating Middle East tensions. An increase in fuel prices could lead to a spike in inflation that would cause most major central banks to pause. Still, at the moment, it remains only a risk.

On the other hand, the US dollar strengthened on Wednesday after US private employment rose more than expected. The ADP non-farm employment increased by 143,000 in September, above expectations of 124,000. The report suggested a slow approach to rate cuts by the Fed. In a recent speech, Fed Chair Powell noted that the central bank might implement two more cuts this year, each 25-bps. 

However, all eyes are on the nonfarm payrolls report, which could change this outlook. Economists expect the US economy to add 148,000 jobs in September, slightly above the previous month’s increase. On the other hand, the unemployment rate might hold steady at 4.2%. Before this, traders will watch unemployment claims to see the state of the labor market.

GBP/USD key events 

  • US unemployment claims
  • US ISM Services PMI

GBP/USD technical forecast: Bearish channel breakout

GBP/USD forecast
GBP/USD 4-hour chart

On the technical side, the GBP/USD price has plummeted below the 1.3200 support level. The bearish bias is strong since the price has fallen well below the 30-SMA, At the same time, the RSI trades in the oversold region, indicating massive bearish momentum.

Are you interested in learning more about social trading platforms? Check our detailed guide-

The decline came after the RSI made a bearish divergence with the price. Initially, bulls kept the price in a bullish channel. However, after the RSI showed weakness, bears took over by breaching the SMA and the channel support. If the downtrend continues, the price will soon reach the 1.3051 support level.

Looking to trade forex now? Invest at eToro!

68% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.

Saqib Iqbal

Saqib Iqbal

Saqib Iqbal is a market analyst, prop fund trader and mentor, serving the industry with his analysis and educational content since 2011. The author has great exposure to different financial markets and institutions. He's well-known for his day trading reviews and multiple timeframe analysis.