The Pound Sterling (GBP) continues to hold the key support of 1.2970 against the US Dollar (USD) in Tuesday’s London session. However, the outlook of the GBP/USD pair remains uncertain as the US Dollar grips gains near an 11-week high and is expected to gain further amid United States (US) election uncertainty. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, clings to gains near 104.00.
A sheer strength in the US Dollar suggests that traders are pricing in former US President Donald Trump’s victory in presidential elections, which are just two weeks away. Trump vowed to hike tariffs and lower taxes in his election promises if he wins. The scenario will undermine the currencies of the US’s close trading partners and keep interest rates escalated. However, the latest national polls have shown a neck-and-neck competition between Trump and US Vice President and Democratic candidate Kamala Harris.
Regarding the interest rate outlook, traders have priced in two rate cuts of 25 bps by the US Central Bank in November and December. The Fed can afford to avoid a sizeable interest rate cut in November, as earlier expected after a slew of upbeat US economic data for September diminished risks of an economic slowdown.
The Pound Sterling trades close to near the psychological support of 1.3000 in European trading hours. The near-term outlook of the GBP/USD remains bearish as it hovers below the 50-day Exponential Moving Average (EMA), which trades around 1.3090.
The 14-day Relative Strength Index (RSI) hovers near 40.00. A breakdown through the same will strengthen the bearish momentum.
Looking down, the upward-sloping trendline drawn from the April 22 low of 1.2300 will be a major support zone for Pound Sterling bulls near 1.2920. On the upside, the Cable will face resistance near the 20-day EMA around 1.3110.
Andrew Bailey is the Bank of England's Governor. He took office on March 16th, 2020, at the end of Mark Carney's term. Bailey was serving as the Chief Executive of the Financial Conduct Authority before being designated. This British central banker was also the Deputy Governor of the Bank of England from April 2013 to July 2016 and the Chief Cashier of the Bank of England from January 2004 until April 2011.
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Source: Bank of England
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