GBP/USD: pound’s engine has faltered
By Elizaveta Belugina
GBP/USD had a losing week and technical and fundamental factors show that there will be more declines to come.
The Bank of England cut growth and inflation forecasts for the British economy. The nation’s employment data came out mixed: the unemployment rate froze at 6%, though a decline was expected. Average earnings rose, but economists don’t see a trend here. As a result, the expectations of a rate hike in the United Kingdom are pushed further into future.
The UK will release October inflation data on Tuesday. The indicator has fallen to 1.2% in Sep., while the Bank of England’s target is at 2%. Low inflation is now the key thing preventing the rate hike. The lower the reading is, the worse it is for GBP/USD.
Also watch the BoE’s meeting minutes due on Wednesday and Britain’s retail sales on Thursday, as well as the data from the US.
Technical picture remains rather bearish. After the pair reached 1.5730, our next targets are 1.5600 and 1.5400. There’s a 76.4% Fibo at 1.5380. Main resistance is located at 1.5905 (bottom of the weekly Ichimoku Cloud) and 1.6000.