The GBPUSD currency pair continues to trade in the range of 1.21-1.23, very close to the semi-annual lows. The bulls' attempts to break out of the flat range prove to be unsuccessful, the prices are not able to significantly break away from the bottom. Both technical and fundamental factors speak in favor of preserving the weakness of the pound against the dollar. This week's events may increase GBPUSD volatility, but they are unlikely to seriously affect the power balance on the currency market.
The Fed and the Bank of England are expected to maintain the current levels of interest rates at their meetings on November 1 and 2, respectively. At the same time, the American economy has come to the end of the monetary policy tightening cycle with a much greater margin of safety than the British one. US GDP increased by almost 5% over the past quarter, while inflation fell below 4%. British officials can only dream of such statistics: the rate of price growth in the United Kingdom still exceeds 6.5%, while the economy is on the verge of recession.
Inflation in the UK remains the highest among the world's developed economies. At the same time, a series of 14 consecutive key rate hikes by the Bank of England to curb price growth is increasingly damaging the housing market, jobs and consumer spending. Fortunately for the British regulator, the fight against inflation is paying off after all.
According to data released today, UK chain store price growth slowed from 6.2% to 5.2% in September, the lowest since last August. Non-food inflation also fell by 1% to 3.4%. The statistics allows the Bank of England to officially end the cycle of rate hikes. This would be a positive factor for the economy, but the pound exchange rate will continue to be under pressure.
The main scenario for GBPUSD is to maintain current positions. In case of growth impulses, short positions can be opened, waiting for the price to return to the level of 1.21.
Consider the following trading strategy:
Sell GBPUSD not higher than the level of 1.225. Take profit - 1.21. Stop loss - 1.23.
Traders may also use a Trailing stop instead of a fixed Stop loss at their discretion