GBP/USD declines over 0.35% on Wednesday, falling beneath the 1.3250 level, as expectations for a rate cut by the Bank of England for the upcoming November meeting increase, while market participants anticipate the Federal Reserve monetary policy decision. The GBP/USD pair is currently at 1.3219, with sellers driving the spot price beneath the 200-day Simple Moving Average of 1.3237.
GBP/USD declines 0.35% to 1.3219, falling below the 200-day SMA at 1.3237 for the first time in weeks. UK inflation held steady in September while labor data showed signs of weakness, leading markets to estimate a 74% chance of a rate cut by the BoE in December. The Fed is anticipated to implement a 25 basis points cut on Wednesday, although Powell’s tone remains ambiguous due to an extended period of limited US data availability.
> Sterling declines as disappointing UK data and fiscal worries loom before important central bank meetings : Data indicated that the labor market is showing signs of weakening, while inflation held steady at 3.8% in September. Additionally, a report indicated that Chancellor Rachel Reeves may encounter a £20 billion impact on public finances due to a productivity downgrade by the Office for Budget Responsibility. Market participants had anticipated a 74% rate cut in December, as indicated by the report. Market participants on the other side of the Atlantic had anticipated a 25-basis-point rate cut by the Fed later in the day. Nonetheless, increasing skepticism surrounds the communication from Fed Chair Jerome Powell, particularly as the government shutdown results in limited data availability.
Analysis indicates potential further decline in GBP/USD. A daily close beneath the 200-day SMA could set the stage for testing the August 1 swing low of 1.3141, with the 1.3100 level coming next. In the event of additional weakness, the upcoming cycle low is the April 7 low of 1.2707. If GBP/USD reaches 1.3300, anticipate a test of the 20-day SMA at 1.3367, followed by 1.3400.