GBP/USD Range-Bound as Traders Await Central Bank Decisions

Posted Monday, October 30, 2023 by
Arslan Butt • 2 min read

The GBP/USD pair remains entrenched in a multi-day trading range, hovering around the 1.2100 level during the Asian session on Monday. Market participants are exhibiting caution and opting to stay on the sidelines as they anticipate key central bank events scheduled for this week. Specifically, the focus is on the eagerly awaited FOMC decision on Wednesday, followed by the Bank of England (BoE) meeting on Thursday.

The Federal Reserve (Fed) is widely expected to maintain its current policy stance and keep interest rates unchanged for the second consecutive time in November. However, markets are still pricing in the possibility of a rate hike later in the year. Positive US economic data releases, such as resilient economic performance and robust spending, have reinforced these expectations. Coupled with elevated inflation figures, this supports the Fed’s hawkish stance and sustains higher US Treasury bond yields, bolstering the US Dollar (USD) while putting pressure on the GBP/USD pair.

Meanwhile, the Bank of England (BoE) is anticipated to retain its benchmark interest rate at 5.25%, reflecting concerns about a looming recession. However, the central bank is unlikely to ease its stance on combating high inflation and may leave room for further tightening. This uncertainty is deterring traders from taking aggressive positions on the British Pound (GBP), contributing to the pair’s sideways movement. The absence of buying interest suggests that the path of least resistance for GBP/USD remains downward, though bears await a break below the 1.2100 level before committing to fresh positions.

In terms of economic data, neither the UK nor the US is set to release significant market-moving data on Monday. Consequently, US bond yields will continue to influence USD price dynamics and create short-term trading opportunities for the GBP/USD pair. Additionally, broader risk sentiment will play a crucial role, as it tends to drive demand for the safe-haven US Dollar. Given the current fundamental backdrop, traders are advised to exercise caution before initiating new directional trades.

Technical Outlook for GBP/USD

The GBP/USD pair exhibits a mild bearish bias, testing the 1.2110 level. To confirm the continuation of the anticipated bearish trend on an intraday basis, the price must surpass this level, with a target set at 1.2037 as the next key support.

The EMA50 remains supportive of the expected bearish trend. However, breaching the 1.2155 level would halt the suggested decline and potentially lead to a recovery attempt, targeting the 1.2297 region in the near term.

The expected trading range for today is between 1.2030 support and 1.2180 resistance.

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