Created on November 04, 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.

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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Pound Sterling surges against US Dollar ahead of US Trump-Harris battle

The Pound Sterling (GBP) performs strongly against its major peers at the start of the week, with investors also focusing on the Bank of England’s (BoE) monetary policy decision, which will be announced on Thursday.

The BoE is expected to cut interest rates by 25 basis points (bps) to 4.75%. Out of the nine-member led Monetary Policy Committee (MPC), seven members are expected to vote in favor of a rate reduction, while two are expected to support leaving interest rates unchanged at 5%. BoE external MPC member Catherine Mann is likely to be one of those who would support keeping rates stable. Read more…

GBP/USD Forecast: Pound Sterling struggles to hold above key technical level

After closing the fifth consecutive week in negative territory, GBP/USD opened with a bullish gap and rose toward 1.3000 early Monday. 

The broad-based selling pressure surrounding the US Dollar (USD) fuelled GBP/USD’s rally at the beginning of the week. The uncertainty surrounding the outcome of the US presidential election seems to be weighing on the USD, especially after betting site PredictIt has placed a 51% odd of a Kamala Harris win on Tuesday, marking the vice president’s first lead over Donald Trump since October 9. Read more…

• Market participants are eagerly awaiting the outcome of the presidential election. 

• The US economy added only 12,000 jobs in October.

• The yen remained steady after the BoJ policy meeting.

The USD/JPY forecast shows some relief for the yen as the dollar eases ahead of the US presidential election. The greenback has fallen since last week as political uncertainty in the US sent investors to other safe-haven assets like the yen. At the same time, the yen has remained steady since the BoJ policy meeting. 

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Market participants are eagerly awaiting the outcome of the presidential election. Bets have fluctuated in recent weeks, with no clear winner. Initially, Trump was in the lead, which supported the dollar. However, by Monday morning, PredictIT showed that Kamala was at 54 cents while Trump was at 52 cents. A Kamala win would allow the Fed to continue lowering borrowing costs, which is bearish for the greenback. 

On the other hand, a Trump win would lead to a rally in USD/JPY as markets adjust to a hawkish outlook for the Fed. Trump’s policies on tariffs and taxes would increase inflation, which would likely force the Fed to pause or hike rates. 

Elsewhere, data on Friday revealed that the US economy added only 12,000 jobs in October, well below estimates of 106,000. Furthermore, it was a massive drop from the previous month’s reading, solidifying bets for a November rate cut. Nevertheless, experts noted that most of the change in employment was due to the impact of hurricanes on the economy. 

Meanwhile, the yen remained steady after BoJ policymakers held rates unchanged and failed to signal a cautious outlook. The changes in Japan’s political landscape had led some to expect a more cautious BoJ policy outlook.

USD/JPY key events today

The price might consolidate, with no key reports coming out today.

USD/JPY technical forecast: Sentiment shifts, but bears remain hesitant

On the technical side, the USD/JPY price trades below the 30-SMA after finding resistance at the 153.75 level. Bulls stopped near this level, where the RSI showed exhaustion in the uptrend. The RSI made a bearish divergence, later allowing bears to breach the 30-SMA support. 

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However, the new move remains weak since bears have failed to detach from the SMA. At the same time, bears face a strong hurdle at the 151.74 support level. A break below this level would allow USD/JPY to start making lower lows. Otherwise, the uptrend will continue.

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• EUR/USD started the new week higher and climbed to the 1.0900 area.
• The US Dollar stays under pressure as markets gear up for the presidential election.
• The pair’s technical outlook points to a bullish tilt in the near term.

EUR/USD opened with a bullish gap and advanced to the 1.0900 area to start the new week, with the US Dollar (USD) coming under heavy selling pressure heading into the presidential election.

Changes in betting odds for the winner of the presidential election over the weekend triggered a USD selloff. PredictIt has placed a 51% possibility of a Kamala Harris winning on Tuesday, marking the vice president’s first lead over Donald Trump on the site since October 9. Meanwhile, the disappointing labor market data could also be putting additional weight on the USD’s shoulders, even though the immediate market reaction was mixed on Friday.

The US Bureau of Labor Statistics (BLS) reported that Nonfarm Payrolls (NFP) in the US rose by only 12,000 in October, down from the 223,000 increase (revised from 254,000) recorded in September and much worse than the market expectation of 113,000. In its press releases, the BLS noted that it was likely that payroll employment estimates in some industries were affected by the hurricanes.

Factory Orders for September will be the only data featured in the US economic docket on Monday, which is unlikely to trigger a market reaction.

Investors will keep a close eye on changes in betting odds and latest poll results. At this point, it could be risky to take a directional position in EUR/USD. 

EUR/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart stays above 60 and EUR/USD holds comfortably above the 200-day Simple Moving Average (SMA), currently located at 1.0870, despite having closed the previous week below this level.

EUR/USD was last seen trading near 1.0900. Once the pair rises above this level and starts using it as support, 1.0950 (100-day SMA) could be seen as next resistance before 1.1000 (round level, static level, 50-day SMA). On the downside, a daily close below 1.0870 could discourage buyers and open the door for an extended slide toward 1.0800 (round level, static level).

• GBP/USD trades in positive territory above 1.2950 on Monday.
• The US Dollar started the week under strong selling pressure.
• The cautious market mood could limit the pair’s upside.

After closing the fifth consecutive week in negative territory, GBP/USD opened with a bullish gap and rose toward 1.3000 early Monday. 

The broad-based selling pressure surrounding the US Dollar (USD) fuelled GBP/USD’s rally at the beginning of the week. The uncertainty surrounding the outcome of the US presidential election seems to be weighing on the USD, especially after betting site PredictIt has placed a 51% odd of a Kamala Harris win on Tuesday, marking the vice president’s first lead over Donald Trump since October 9. 

Meanwhile, US stock index futures trade mixed in the early European session, reflecting a cautious market mood. Investors could refrain from taking large positions until they have a clear picture of who the next president of the US will be. In case there is a selloff in US stocks following the opening bell, GBP/USD could have a difficult time stretching higher.

The US economic calendar will feature Factory Orders figures for September but markets are unlikely to react to this data. On Friday, The US Bureau of Labor Statistics (BLS) announced that Nonfarm Payrolls (NFP) in the US rose by only 12,000 in October. This reading followed the 223,000 increase (revised from 254,000) recorded in September and missed the market expectation of 113,000 by a wide margin. In its press release, the BLS explained that it was likely that payroll employment estimates in some industries were affected by the hurricanes.

GBP/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart stays slightly above 50 but GBP/USD struggles to hold above 1.2980, where the 100-day Simple Moving Average (SMA) is located, reflecting buyers’ hesitancy.

In case 1.2980 holds as resistance, 1.2940 (static level) could be seen as next support before 1.2900 (round level). Once GBP/USD stabilizes above 1.2980, 1.3000 (static level, 20-day SMA) could act as interim resistance ahead of 1.3040 (static level).

Japan’s Election Result Leaves the BoJ Facing Political Uncertainty

The October 27 general election left Japan in political limbo. The Liberal Democratic Party (LDP) – Komeito coalition fell short of the 233 seats needed for a majority.

The result leaves the BoJ facing political party uncertainty as the LDP considers lesser parties to form a government. Cost of living remains a primary issue for voters, and the LDP may make concessions that could impact BoJ monetary policy plans.

Potential political pressure on the BoJ to maintain loose monetary policy may adversely impact Japanese Yen demand.

Expert Views on the Bank of Japan Rate Path

In a recent Reuters poll, economists expect Japan’s economy to slow sharply, from an annualized 2.9% in Q2 2024 to 0.7% in Q3 2024. Economists attributed the projection to softer private consumption as higher prices offset wage growth.

The prospect of weaker growth could further reduce expectations of a near-term BoJ rate hike and Japanese Yen demand.

US Services PMIs, the Presidential Election, and the Fed

On Tuesday, November 5, the all-important ISM Services PMI will influence US dollar demand. Economists expect the ISM Services PMI to decline from 54.9 in September to 53.3 in October. A larger decline toward 50 could boost bets on a December Fed rate cut as the services sector accounts for around 80% of the US economy.

However, the November 5 US Presidential Election will likely overshadow the data, potentially fueling USD/JPY volatility. A Trump victory could drive the USD/JPY through last week’s 154 resistance.

On Thursday, November 7, the Fed will deliver its penultimate interest rate decision of 2024.

Economists expect the Fed to cut rates by 25 basis points. A 25-basis point Fed rate cut would shift the focus to forward guidance, which may hinge on the US election result. Support for a 25-basis point December rate cut may drag the USD/JPY below 151.5. Conversely, a more hawkish Fed rate path may signal a USD/JPY move through 154.

Short-term Forecast:

Near-term USD/JPY trends will depend on Japan’s economic indicators, the US Presidential Election, and the Fed’s interest rate decision. Softer-than-expected data from Japan, a Trump victory, and a less dovish Fed interest rate outlook could drive US dollar demand and a USD/JPY move through 154.

Conversely, a Kamala Harris win and Fed support for a December interest rate cut could pull the USD/JPY below 151.5.

Investors should stay alert in a pivotal week for the USD/JPY pairing. Monitor real-time data, central bank views, and expert commentary to adjust your trading strategies accordingly. Stay informed with our latest analysis and news to navigate the FX markets.

USD/JPY Price Action

Daily Chart

The USD/JPY remains well above the 50-day and 200-day EMAs, sending bullish price signals.

A USD/JPY breakout from the trend line could signal a move toward last week’s high of 153.877. A return to 153.877 could allow the bulls to target the 155 level.

Investors should consider Japan’s economic indicators, the US Presidential Election, and the Fed’s interest rate decision for USD/JPY price trends.

Conversely, a drop below the trend line could bring the 151.685 support level into play. A fall through the 151.685 support level may signal a drop toward 150 and the 200-day EMA.

The 14-day RSI at 64.50 indicates a USD/JPY return to 153.877 before entering overbought territory.

• The US economy expanded by 2.8%, below estimates of 3.0%. 

• The US reported dismal job growth in October.

• Market participants will focus on the Bank of England policy meeting.

The GBP/USD weekly forecast supports further downside with the looming BoE rate cut and the US presidential election. 

Ups and downs of GBP/USD

The pound had a slightly bearish week as the dollar fluctuated amid mixed economic reports. The US economy expanded by 2.8%, below estimates of 3.0%. The weaker-than-expected economic performance temporarily weighed on the dollar. 

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Another report on Thursday revealed that inflation accelerated by 0.3%, meeting forecasts. Meanwhile, on Friday, the US reported dismal job growth. The economy only added 12,000 jobs compared to estimates of 106,000. Meanwhile, the unemployment rate held steady at 4.1%. The dollar initially sunk but recovered before the day ended as focus shifted to the upcoming presidential election. 

Next week’s key events for GBP/USD

Next week, market participants will focus on the Bank of England policy meeting on Thursday. According to a Reuters poll, the central bank will likely cut borrowing costs by 25-bps. Notably, inflation in the UK has eased below the 2% target, putting more pressure on policymakers to cut rates. However, economists believe this might be the last rate cut for the year. 

Similarly, the Federal Reserve might cut rates by 25-bps on the same day. Recent data from the US has shifted the outlook for Fed rate cuts to a more gradual pace. Nevertheless, market participants will pay attention to messaging for future policy moves. Furthermore, the US will release data on initial jobless claims and nonfarm productivity. 

GBP/USD weekly technical forecast: Lower low strengthens bearish bias

On the technical side, the GBP/USD price has broken below and retested the 1.3002 key level. With this move, bears have confirmed a new downtrend by breaking below the previous low to make a lower low. The reversal started at the 1.3400 resistance level. Here, the price started making strong bearish candles, which later punctured the 22-SMA support and the bullish trendline. 

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Currently, GBP/USD is bouncing lower after retesting the 1.3002 level. The price has pushed below the SMA, and the RSI is in bearish territory. In the coming week, bears will target the 1.2701 support level. Moreover, the bearish bias will remain if the price stays below the SMA and the RSI below 50. 

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Can the US dollar break key resistance next week, and how might markets react to the November 5th US presidential election?

Watch today’s forex forecast video for all of the details, including how I’m trading the DXY, EURUSD, GBPUSD, USDJPY, and USDCAD next week.

US Dollar Index (DXY) Forecast

The DXY remains below its 104.50 resistance level, but is showing considerable strength today following a dismal US jobs number.

However, the US dollar needs to get above 104.50 on the higher time frames to signal a continuation toward levels like 106.00.

Until then, dollar bulls need to be careful, as the potential for a pullback remains.

I’ve mentioned for weeks that I expect any pullbacks from the DXY to be relatively shallow.

But with the upcoming US presidential election next week, traders should brace for volatility from the US dollar and markets at large.

EURUSD Forecast

EURUSD worked out beautifully for us today on the latest non-farm payroll (NFP) numbers.

If you saw Thursday’s EURUSD video, you know I was watching for a short on a sweep of the 1.0880 high and a 1.0900 retest.

Today’s high for the euro is 1.0906, just six pips above my ideal entry.

Not only that, but the pair is down over 50 pips since that retest, and is on track to carve a potential bearish engulfing day.

However, traders should know that 1.0840 is likely to attract buyers next week.

So, unless the EURUSD can close below 1.0840 today, we could see a bounce from that region next week.

That makes sense when you consider that the DXY is below 104.50 resistance.

But as I discussed throughout October, I do not favor US dollar shorts following the 102.00 and 102.60 reclaims.

In my opinion, that’s probably enough to keep the USD bullish through the rest of 2024.

We will see pullbacks from the DXY, but I’d rather be a US dollar buyer on those pullbacks than try to short an aggressive dollar uptrend.

GBPUSD Forecast

GBPUSD has looked increasingly weak against the US dollar and its euro counterpart.

The pair retested 1.3050 again this week, which triggered a 150-pip drop back to our 1.2900 support level.

So far, this is still the trading range for GBPUSD.

However, with next week’s US presidential election, we have to entertain the possibility of a breakout from this range.

Note that “breakout” can refer to bullish and bearish moves.

A sustained break above 1.3050 on the daily time frame would expose recent highs near 1.3100 and 1.3175, while a daily close below 1.2850 would open up 1.2700.

USDJPY Forecast

In my latest USDJPY video, I discussed the potential for a bullish reclaim of the 151.00-152.00 region and what that could mean for the pair.

So far, we’ve seen USDJPY bulls reclaim that area on the high time frames, and defend it as new support on Friday.

If this continues through next week’s US election, we could see USDJPY target 155.60 and even 160.00.

That said, remember that the DXY needs to take out 104.50 resistance for the US dollar to strengthen across the board.

Until then, bulls should tread carefully.

USDCAD Forecast

USDCAD is working on its sixth daily close above a multi-year resistance.

It’s also a second higher weekly close above the 1.3880 level, which dates back to October 2022.

If USDCAD can hold this breakout through next week’s US presidential election, it could send the pair significantly higher toward 1.4200 and 1.4700.

As always, be careful with the upcoming volatility, and remember that even the strongest uptrends have pullbacks.

November 1, 2024 – Written by John Cameron

STORY LINK Pound to Euro Exchange Rate Strikes Four-Week Low as Eurozone Inflation Beats Forecasts

The Pound Euro (GBP/EUR) exchange rate plunged on Thursday after hotter-than-forecast Eurozone inflation saw the single currency surge.

At the time of writing, GBP/EUR traded at €1.1856, down 0.6% on the day.

The Euro (EUR) surged on Thursday following the release of the Eurozone’s latest consumer price index, which surpassed expectations.

Preliminary CPI data for October revealed that Eurozone inflation accelerated more than anticipated, climbing from 1.7% to 2%, outpacing forecasts of 1.9%. Core inflation remained unchanged at 2.7%, defying predictions of a slight decrease to 2.6%.

This unexpected rise in inflation came on the heels of a stronger-than-expected GDP report on Wednesday, which indicated that Eurozone growth picked up in the third quarter, increasing from 0.2% to 0.4%.

Consequently, markets reduced their expectations for interest rate cuts by the European Central Bank (ECB), driving the Euro higher.

The increasingly risk-sensitive Pound (GBP) slipped against the safe-haven Euro on Thursday amid market fears that global borrowing costs would remain elevated for longer than hoped.

This sentiment was bolstered by the Eurozone’s CPI exceeding expectations and the US core PCE price index, the Federal Reserve’s preferred inflation gauge, also coming in higher than anticipated.

Additionally, the UK government’s Autumn Budget, announced on Wednesday, sent UK gilt yields soaring. Chancellor Rachel Reeves announced a significant increase in borrowing, and upward revisions to inflation forecasts led many to speculate that the Bank of England (BoE) might slow its pace of policy easing.

While the reduced expectations for BoE rate cuts could be seen as a positive for the Pound, worries about high UK government borrowing and the broader risk-averse market sentiment both put downward pressure on GBP on Thursday.

Looking forward, the Pound Euro exchange rate may experience a calm finish to an otherwise turbulent week on Friday. Significant market-moving data becomes scarce on both sides, potentially leaving GBP and EUR investors to pause and reassess their positions.

However, next week is expected to be eventful again, with key German data scheduled for release and the Bank of England poised to announce its latest interest rate decision. Although the BoE is anticipated to cut rates, their forward guidance could provide a lift to the Pound if policymakers express more caution about future rate cuts in light of the recent budget.

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The Dollar should weaken if Kamala Harris wins next week’s U.S. election, but a balance of probabilities favours strength.

According to a new analysis from Crédit Agricole, the U.S. Dollar will retest 2024 highs in the event of a Donald Trump win next week but fall if Kamala Harris wins.

“A soft landing in the U.S. in 2025 could further suggest that the USD rate appeal could persist in the months after the elections. We subsequently see the USD moving closer to its 2024 highs in the wake of a Trump victory while suffering only limited losses following a Harris win,” says Valentin Marinov, Head of G10 FX Strategy at Crédit Agricole.

Losses for the Dollar in the event of a Harris win would nevertheless put the GBP/USD comfortably back above the 1.30 marker, provided Sterling stabilises following its post-budget wobble.

“EUR/USD and GBP/USD could slump to their Q124 lows or head lower still in response to a Trump victory accompanied by a ‘red wave’ in the US Congress. In contrast, their upside could be limited to 1.10 and 1.33 in the event of a Harris victory and a divided US Congress,” says Marinov.

Analysts at Barclays say a Harris win would see the USD erase the Trump premium, which they think amounts to a 2% drop (i.e. 2% recovery in GBP/USD and EUR/USD).

The market is currently expecting a Trump win, with odds set at about 60%.

GBP/USD investment bank consensus forecasts: The end-2024 and 2025 guide from Corpay has been released. It shows a sizeable uplift was made to the consensus forecasts for GBP/USD. Please request a copy here.

Rising odds of a Trump victory are reflected in a strengthening U.S. Dollar through the course of October, which pushed the Pound to Dollar exchange rate to an October 31 low at 1.2843.

Also of significance to the market outlook is the outcome of votes for the Senate and House of Representatives. Should the Republicans win both houses, their control of Congress significantly boosts a Trump agenda.

A “red wave” outcome is increasingly likely, according to betting markets, where the odds of this outcome now sit at 44%.

“We see the most bullish dollar outcome as a red sweep and the most bearish dollar outcome as a blue sweep, but the magnitude of the moves is likely larger in the former,” says George Saravelos, an analyst at Deutsche Bank.

“We see the dollar rising across all currency pairs in a red sweep,” he says.

Analysts say Trump’s policy agenda is more radical than that of his Democrat rival Kamala Harris, putting a number of USD-positive policies and scenarios in play.

“We suspect Trump’s proposed curbs on immigration and new tariffs would be stagflationary,” says Paul Ashworth, Chief North America Economist at Capital Economics.

Trump intends to impose significant import tariffs, which would raise domestic inflation and prevent the Federal Reserve from cutting as far and as fast as previously assumed.

“The proposed 10–20% increase in tariffs across the board has the potential to be inflationary,” says Tom Kenny, Senior International Economist at ANZ Bank.