GBP/USD Price Prediction Following UK’s Policy ReversalOctober 4, 2022
- The pound surges as the United Kingdom government halts the planned rate cuts.
- 4hr chart shows GBP/USD forming a pennant with the measured move past 1.18.
- The softening job market in the United States should support the GBPUSD exchange rate.
A turn of events had the United Kingdom government pulling a 180 from its latest policy, backing down the planned 45p rate cut. The pound soared before consolidating for some time following last week’s BoE (Bank of England) intervention to cool the bond market.
The announcement triggered another uptick, supporting the pound’s ongoing revival from its all-time low against the USD. So, what should we expect from the GBP-USD exchange rate as the pair recovers from declines since the ‘mini-budget’ announcement?
GBP/USD Heading to 1.18 & Beyond
The recent announcement fueled GBP-USD’s rally. Meanwhile, the exchange rate revived from 1.04 one week ago, closing the past week at around 1.12. Though the enormous rally, there’s still room for more. The pennant setup’s measured move suggests an uptick to 1.18 & beyond.
Technical investors value the formation because of the massive upside actions after the consolidation ends. Besides the UK news, the softening of US data helps. Yesterday news from the US indicated that the manufacturing industry cooled during the September sessions.
Furthermore, the employment component noted a sharp shrink, indicating a potential labor market ease. That saw traders increasing their predictions that the Federal would slow the tightening cycle, and the United States dollar responded with a weak trade tone.
The United States and the United Kingdom’s economic data should support GBP-USD’s bullish case. The UK’s financial policy U-turn renews confidence – an optimistic signal for the British pound. Meanwhile, poor economic data from the United States should dent USD amid increased bets for Fed’s imminent pivot.
GBP-USD Monthly Chart
Participants appear less bearish on GBP from a sentiment standpoint, regardless of last week’s plunge. Meanwhile, the CFTC speculative remained short, declined last week, and reduced by 3rd since May, signaling exhausted shorts. The IGCS (IG Client Sentiment) index suggests that more traders (54%) prefer executing longs for GBP weekly.
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