GBP/USD Analysis: Awaits Rate Cuts – 04 November 2024

-- For two days in a row, the GBP/USD currency pair has been trying to rebound higher to compensate for the strong losses it suffered last week, which extended to the 1.2843 support level, its lowest in three months.
-- But the rebound gains did not exceed the 1.2998 level, which is stable near it at the time of writing the analysis.
-- Amid this performance, the Bank of England’s decision on Thursday may draw particular attention, as it comes after the higher borrowing and spending plans revealed in the Labour government’s budget pushed borrowing costs in the United Kingdom to their highest levels in a year.

This tense backdrop is not expected to distract British policymakers from further easing at the moment. All 49 economists surveyed by Bloomberg expect them to deliver a quarter-point interest rate cut on Thursday. With the U.K. budget set to ease, Bloomberg Economics expects the accompanying quarterly forecasts to likely show higher growth and medium-term inflation.

Meanwhile, the U.K. will take a tougher approach to future public-sector pay bonuses, part of Chancellor Rachel Reeves’ renewed efforts to reassure financial markets that she will manage the country’s finances carefully.

From Washington. The U.S. Federal Reserve and many of its rich-world peers are widely expected to cut interest rates again this week, right after the U.S. presidential election that may not be decided yet. The world’s central banks, responsible for more than a third of the world’s economy, will set borrowing costs in the wake of the vote, clinging to whatever certainties they can about the likely trajectory of U.S. policy over the next four years.

With Vice President Kamala Harris and former President Donald Trump squaring off ahead of Election Day on Nov. 5, monetary officials from Washington to London may find themselves on tenterhooks. Regardless of the election, U.S. policymakers have already signalled their willingness to move forward with a more gradual pace of rate cuts after September’s half-point cut. Economists widely expect a quarter-point move on Thursday, followed by another in December — and their conviction has grown after data on Friday showed the weakest hiring since 2020.

Fed officials are trying to stay out of politics, yet they have begun the U.S. rate-cutting cycle ahead of the final stretch of the election, whose outcome could hinge on voters’ sentiment about the economy. While Fed Chairman Jerome Powell is likely to emphasize that current conditions warrant less restrictive policy when he speaks after the decision, he and his colleagues still risk political backlash.

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Technical forecasts for the GBP/USD pair today:

According to the performance on the daily chart, the general trend of the GBP/USD currency pair is still bearish and there will be no initial break of the current trend without stability above the resistance of 1.3150. This requires the US dollar's gains to stop first. If Trump wins the US presidential elections this week, the bears will have the momentum to move towards deeper bearish levels and the support station of 1.2660 will be the most prominent for this to happen. The GBP/USD price will remain in its current range until the reaction to economic data, US events and central bank announcements this week.

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Original Source DailyForex.com provides daily fundamental and technical analysis and signals for those looking to trade based on trends in the currency markets.