Where Will the USD-GBP End Up After the BOE nd the FED?
USD-GBP has seen increased volatility this week. Yesterday the decline in GBPUSD stopped just above 1.28, after it found support at the 50 daily SMA, following a steep decline of more than 2 cents since July 17. The daily candlestick closed as a doji which suggests a bullish reversal after the retreat, however, there are many events affecting both the British Pound and the US Dollar this week, and no one can really predict, where this pair will end up on Friday evening.
GBP/USD Chart Daily – Bullish Reversing Signal Forming at the 50 SMA 
The GBP/USD pair broke above 1.30 in early July, but an inverted hammer candlestick on the weekly chart this week indicated a potential bearish reversal. The price has since fallen by approximately 2 cents from its peak, suggesting that the bullish breakout might have been a false move. However, the decline paused around the 50-day SMA (yellow) today. The CBI Realized Sales for June reported a -43k decline, compared to the expected -20k, adding to the bearish sentiment in this forex pair. Nonetheless, there could be a “buy-the-fact” scenario, where the GBP might see a relief rally if the Bank of England (BOE) decides not to cut rates.
UK Economic Weakness and BOE Expectations
The BOE is anticipated to implement a 25 bps rate cut on Thursday due to increasing signs of economic weakness in the UK. This expectation has added pressure to the GBP. Additionally, focus is shifting to the upcoming UK budget, which may have prompted some early selling of the GBP amid speculation about a possible capital gains tax increase. However, the newly appointed chancellor indicated that the budget, due on October 30, would consider all options, stating that the nation’s coffers are bare despite rising VAT revenues due to increased prices.
UK Government Austerity Measures
Austerity appears to be the central strategy, according to the chancellor, which could place further strain on the UK economy. The emphasis on fiscal tightening and the potential impact on consumer spending and economic growth are key concerns for market participants. As the week progresses, the BOE’s rate decision and the details of the forthcoming budget will be closely watched for their implications on the GBP and the broader UK economic outlook.
BRC Shop Price Index YoY
GBP/USD Live Chart
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