GBPUSD Bounces from 100-SMA as UK Inflation Nears 2.6%

FxNews—The British Pound is strengthening and is close to reaching $1.3, bouncing back from its lowest point in two and a half months. Investors are now turning their attention to the Bank of England’s interest rate decision, which is happening this Thursday.

Currently, markets believe there’s a 91% chance that the Bank will cut interest rates by 0.25%. However, they expect fewer rate cuts next year than before last week’s budget announcement.

UK Inflation Set to Hit 2.6% in 2025 Predicts OBR

Recently, the Office for Budget Responsibility updated its inflation forecast for 2025. They now predict an average inflation rate of 2.6%, the 1.5% they projected back in March. This new forecast aligns with the Bank of England’s predictions from August, which estimate inflation to be 2.4% in one year, 1.7% in two years, and 1.5% in three years.

Meanwhile, on October 30, Finance Minister Rachel Reeves announced plans for £40 billion (about $51.84 billion) in tax increases and additional borrowing.

• Also read: EURJPY Rises to 166 Barrier as Eurozone Inflation Surges

GBPUSD Technical Analysis – 4-November-2024

As of this writing, the GBP/USD has returned from the 100-period simple moving average and is trading at approximately $1.296. The pair also trades in a bearish flag, meaning the Pound is in a bear market.

As for the technical indicators, the Stochastic Oscillator approaches 80, depicting 77 in the description. This development in the %K suggests that the Pound Sterling could be overpriced in the short term.

GBPUSD Forecast – 4-November-2024

The primary trend remains bearish as long as the GBP/USD price is below the 38.2% Fibonacci retracement level at $1.307. Therefore, the downtrend will likely resume. In this scenario, the next bearish target could be the October 23 low at $1.290.

Furthermore, if the selling pressure exceeds $1.290, the downtrend could extend to October’s all-time low at $1.284. Please note that the bearish outlook should be invalidated if GBP/USD exceeds the 1.307 critical resistance.

• Next read: EURUSD Holds $1.09 Amid Slowing Eurozone Decline

GBPUSD Support and Resistance Levels – 4-November-2024

Traders and investors should closely monitor the key levels below to make informed decisions and adjust their strategies accordingly as market conditions shift.

• Support: 1.290 / 1.284
• Resistance: 1.307 / 1.314