GBPUSD remains below 1.1400 due to market trepidation on US inflation and UK GDP.

VOT Research Report

Market Analytics and Considerations

After declining the most in a week, GBPUSD maintains a defensive posture near the 50-DMA support.

A stronger US dollar is supported by pessimistic mood, and the UK’s light calendar gives bulls confidence.

UK Q3 GDP comes out before the US CPI for October to guide short-term market movements.

Following a 1.6% daily decline, GBPUSD is still somewhat bid around 1.1350 as traders look for guidance in the wee morning of Thursday.

To remind the bears, the Sterling pair depicted widespread US dollar strength amidst a risk-off atmosphere. The British Gross Domestic Product (GDP) for the third quarter (Q3), due for release on Friday, and the US Consumer Price Index (CPI) data for October, due for release today, respectively, restrain the Cable pair’s quick movements.

In the UK’s impending budget plan, there is confidence that the country would take additional positive steps to counter the recent GBPUSD bears.

UK will reduce the fee on bank earnings to 3% in order to maintain industry competition. The new diplomatic efforts of UK Prime Minister (PM) Rishi Sunak, who will attend the British-Irish Council summit on Thursday and meet with the heads of the Scottish and Welsh devolved administrations in an effort to mend relations, are also encouraging for the Cable duo.

The previous day, worries about the coronavirus situation in China combined with expectations of US government deadlock as a result of the midterm elections to negatively affect market sentiment. Equities returned to the red after a three-day hiatus, reflecting the mood, while US Treasury yields likewise stayed low. The US Dollar Index (DXY), however, managed to recover from a six-week low and post its first daily gain in three days.

In contrast, pessimistic remarks from US Federal Reserve (Fed) policymakers and conflicting news reports from Russia attempted to limit the decline of the GBPUSD pair.

Continuing on, the US CPI for October, which is predicted to be 8.0% versus 8.2% previously, may influence GBPUSD movements immediately before the first estimates of the UK Q3 GDP. While the recent pessimistic Fedspeak could hurt the quotation, it is possible that expected weakness in the British GDP report will keep the pair sellers active.

Technical examination

The 50-DMA presents a test to GBPUSD bears at 1.1320, but the pair’s pullback as from two-week-old resistance level, which is near to 1.1585 at press time, gives the bears hope of running into the monthly support mark closer to 1.1200.

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