GBPUSD selloff on weaker UK economic data

The prospects for the GBPUSD currency pair should be analyzed from multiple perspectives, particularly from an economic standpoint. This requires a thorough examination of the factors influencing both the British pound and the US dollar. While Bank of England (BoE) officials are now debating the timing of the next interest rate cut, the Federal Reserve (Fed) is adhering to a more hawkish stance. Jerome Powell, the head of the US regulator, has recently cooled market expectations regarding the continuation of the central bank’s easing cycle in December.

The BoE’s inclination towards reducing borrowing costs stems from lower inflation, rising unemployment, and sluggish GDP growth. Another contributing factor is the potential for tax increases, which could further slow the UK economy. The proposed budget parameters, to be presented on November 26, contain fiscal risks, exerting additional pressure on the pound. The ongoing US government shutdown and geopolitical tensions have also fostered demand for the greenback as a safe-haven asset.

Currently, both regulators are holding their interest rates at 4%. However, the UK’s Consumer Price Index (CPI) is significantly higher than that of the US (3.8% versus 3.0%, respectively). As a result, the Fed is likely to start cutting borrowing costs more confidently than the BoE. If this scenario plays out, it would support the pound and weigh on the dollar.

Comparing longer-term fundamentals, such as the countries' balance of payments, sustainability ratings, business confidence indices, and debt-to-GDP ratios, the situation is clearly unfavorable for the British currency. Hence, selling GBPUSD seems to be a better decision.

The overall recommendation is to sell GBPUSD from the 1.3370 level. Profits should be taken at 1.2200. Stop Loss could be set at 1.3800.

The volume of the open position should be calculated so that the potential loss (protected by a Stop Loss order) does not exceed 1% of your deposit. If your account balance does not allow opening a position of this size, it is better to avoid entering the market on this signal and wait for other trade options that meet low-risk criteria.