- Pound loses momentum during the American session, extends losses versus US Dollar, trims gains against Euro.
- Cable prints fresh daily lows but remains on top of 1.2300.
The GBP/USD pair dropped to 1.2312 during the American session and as of writing is trading at 1.2325, modestly lower for the day, holding in a small range on a quiet day. Volatility remained lows favoring the continuation of the consolidation in GBP/USD.
Since Friday’s US session the pair is moving between 1.2300 and 1.2380, consolidating the sharp rebound from level under 1.2000. A slide below 1.2300 would point to more weakness while on top of 1.2380 a visit to 1.2400 seems likely.
Central banks on the radar
Tomorrow, the European Central Bank will have its meeting. Many changes are expected so the event, including President Draghi press conference, could have a large impact on the currency market.
Next week on Wednesday will be the turn of the Federal Reserve decision. A rate cut is expected. Analysts will look for signals about another rate cut before year-end. “US producer prices unexpectedly rose in August (0.1% MoM, 0.0% MoM expected, 0.2% MoM prior). However, better-than-expected producer prices did not change market expectations that the Fed will cut interest rates again next Wednesday. Moreover, U.S. President Trump added more pressure on the Fed to push down interest rates into negative territory,” explained BBVA analysts.
In the UK, next Thursday, the Bank of England will announce its decision on monetary policy. Of the three central banks is the only one without expectations of new measures. “Brexit preparations resulted in volatile UK growth over the first half of the year, but the underlying trend is subdued and PMIs suggest that remained the case in Q3. Our forecast has been for persistent Brexit uncertainty to prompt a rate cut from the BoE. But 2% core inflation and 4% wage growth might keep the central bank on the sidelines”, said RBC economists.