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GBPUSD: Daily Analysis update & Forecast

GBP/USD broke above 10-DMA resistance at 1.2200 in early NorAm, rising to a 11-day high at 1.2237 as falling U.S. Treasury yields sapped the dollar’s early strength, putting 30-DMA resistance at 1.2244 in focus as traders await Tuesday’s UK employment and flash PMI data for clues to the BoE’s rate path.

Currently, U.S. and UK futures (0#SRA:), (0#SON3:) indicate front-end rates are relatively symmetrical, which is likely to keep GBP/USD anchored near current levels. However, UK rates are expected to fall later in 2024 than U.S rates, which may explain the current bid below 1.21. Also, recent UK CPI data came in above market expectations, which kept rate hike odds for a 25bp hike in early 2024 near 50%, while Fed hike expectations are below 40% in early 2024. Tuesday’s UK employment data and flash PMIs will be of particular interest to sterling traders as the BoE considers its next moves, weighing whether pauses are prudent to allow prior hikes to continue tamping down on inflation. Should tomorrow’s data hint the UK economy is slowing, as BoE projections contend, sterling bears are likely to test the Oct. 4 trend low at 1.2039.

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