GBP/USD hangs near its lowest since April 14, below mid-1.3100s
The GBP/USD pair remains subdued below the mid-1.3100s at the start of a new week, hovering near its lowest level since April 14, which was touched last Friday. The fundamental backdrop currently favors bearish traders, supporting the likelihood of a continuation of the well-established downtrend observed over the past month and a half.
The US Dollar (USD) is holding firm near a three-month high, following a hawkish stance from the US Federal Reserve (Fed) Chair Jerome Powell last week. Powell’s comments pushed back against market expectations for a 25 basis points (bps) interest rate cut in December. This hawkish outlook helps offset concerns related to economic risks from a potential prolonged US government shutdown and continues to underpin the Greenback, weighing on the GBP/USD pair.
Meanwhile, the British Pound (GBP) continues to underperform amid growing worries about the UK’s fiscal position ahead of Finance Minister Rachel Reeves’ Autumn budget, scheduled for November 26. Added to this, rising bets on further rate cuts by the Bank of England (BoE) reinforce the negative outlook for GBP/USD.
It is, however, prudent for traders to await the BoE policy update on Thursday before positioning for the next significant move. Current market pricing indicates about a one-in-three chance of a 25 bps rate cut on November 6, and approximately a 68% probability of a cut by the end of the year. These expectations are driven by softer inflation readings and fiscal challenges that provide more room for monetary easing.
Further supporting the negative sentiment, a recent slowdown in wage growth coupled with rising unemployment rates have reinforced bets on an imminent rate reduction. Alongside last week’s breakdown below the 200-day Simple Moving Average (SMA), the overall technical and fundamental signals suggest that the path of least resistance for the GBP/USD pair remains to the downside.
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