On Tuesday, October 19, the cable ditched its previous lows to move beyond the 1.3780 level.
- In early European trading hours on Tuesday, the GBP/USD pair made new daily gains.
- Lower US Treasury rates are harming the demand for the US currency.
- Sterling is benefiting from rising bets on a BOE rate rise and Brexit-related gains.
GBP/USD fundamental forecast: risk sentiment to support sterling
The GBP/USD currency pair shakes off the previous session’s lackluster performance and trades higher on Tuesday.
As the trading session began, the pair surged over 50 pips after beginning lower. GBP/USD is trading at 1.3773 at writing, up 0.33 % on the day.
Greenback selling pressure
The move is largely supported by selling pressure on the greenback. However, a variety of reasons aided the latest buck retreat. First, the US dollar’s chances are harmed by poor US statistics and global rate rise expectations.
Due to supply-chain limitations and Hurricane Ida, US industrial production decreased 1.3 percent in September. As markets absorbed the Fed’s hawkish forecasts, US benchmark 10-year bond rates fell to 1.57 %.
Meanwhile, the continued correction in the US dollar shows that markets have completely priced in the possibility of a Fed policy tightening sooner rather than later.
It’s worth noting that the minutes from last Wednesday’s FOMC meeting confirmed that the Fed is on pace to begin unwinding its enormous post-pandemic stimulus by the end of 2021.
Pound rises
On the other hand, the British pound rose when Governor Andrew Bailey of the Bank of England (BOE) made hawkish comments. As inflation concerns grow, he believes the Bank of England (BOE) will hike interest rates.
Brexit solution?
Meanwhile, UK Prime Minister Boris Johnson has vowed to find a solution to the Northern Ireland Protocol as part of the Brexit process. As a result, the British pound has risen in recent transactions.
Key data releases from Britain
On the calendar front, the core Inflation rate is the next event that can impact the GBP.
Key data releases from the US
In the US, Building Permits and Housing Starts are the main events to look for.
What’s next?
In the absence of meaningful market-moving economic releases, either from the UK or the US, a sustained advance beyond will be regarded as a new trigger for optimistic traders, setting the scene for more gains.
Traders may, however, take some encouragement from remarks by BoE Governor Andrew Bailey and BoE Chief Economist Catherine Mann.
Aside from that, statements by Fed Governor Michelle Bowman may have an impact on USD price dynamics and create some short-term trading opportunities in the GBP/USD pair.
GBP/USD technical analysis: SMAs pointing gains
Since reaching a bottom at the end of last month, the GBP/USD broke through multiple resistance levels.
On the daily chart, the 100-day MA is slightly above the price, while the MACD is pointing to an upside movement.
A falling trend line now crossing at 1.3800 is the next possible barrier. Finally, resistance can be found at the previous highs of 1.3913 and 1.3982.
On the downside, the pivot point at 1.3674 may act as a support level, while prior lows around 1.3544 and 1.3412 could act as resistance.
