- GBP / USD plunges below 1.3700, on the strength of the US dollar, ahead of the Fed and BoE week
- GBP / USD accumulates its weekly losses, breaking below 1.3700.
- Due to month-end flows and the London correction, GBP / USD plunged nearly 80 pips in the last three hours.
- The basic US PCE for September remains stable at 3.6%, as the November Fed meeting approaches.
The GBP/USD it falls for the third time in the week, hoping to end the week down, with a fall of 0.67%, trading at 1.3696 during the American session at the time of writing this article. Worse than expected, high-tech America’s third-quarter corporate earnings on Thursday and concerns about inflation and tight monetary policy dampened market sentiment, weakening risk-sensitive currencies like the British pound.
In the last three hours, the GBP / USD pair has lost nearly 80 pips, which could also depend on end-of-month flows or profit-taking ahead of a critical week of monetary policy from the Federal Reserve and Bank of America. England. Additionally, US Treasury yields are flat at press time, with the 10-year yield stable at 1.56%, while the US dollar is reversing Thursday’s losses as the US dollar index is recovering 0.62% to 93.93.
Meanwhile, the escalation of the conflict between the United Kingdom and the Eurozone would open another chapter in their negotiations. British Prime Minister Boris Johnson and French President Emmanuel Macron will meet this weekend following a conflict over post-Brexit fishing rights. In the week, France seized a British boat and London threatened to retaliate against French fishermen.
At the time of publication, the European Commission has told member states that the role of the European Court of Justice in the Northern Ireland protocol is not up for discussion.
The Fed’s Favorite Inflation Measure, Core PCE Unchanged at 3.6% from August Reading
On the macro front, the UK economic record is absent.
On the other hand, the Federal Reserve’s favorite inflation measure, the core PCE for September, rose 3.6% annually, a tick lower than estimates and in line with the previous month. Additionally, in its final reading, the University of Michigan Consumer Confidence Index falls to 71.7 in October, down from 71.4 expected.
That said, GBP / USD is gearing up for next week as the central banks of both countries will host their monetary policy meetings. Regarding the US, the Fed is expected to announce the reduction of QE by 15 billion dollars per week, which will start in mid-November. With regard to the UK, market participants are expecting a rate hike from the Bank of England.
GBP / USD Price Forecast: Technical Outlook
Daily chart
On Wednesday, the pair GBP/USD it broke below a daily bearish flag, but on Thursday trimmed some of its losses, but was unable to return above the bottom of the channel. Momentum on Wednesday held today as the GBP / USD collapsed below the lower trend line. It is also testing the 50-day moving average (DMA), which could lead to additional losses for the British pound if it breaks down.
Also, the Relative Strength Index (RSI) is at 49, pointing lower, indicating that the British pound is under strong selling pressure, which favors buyers.
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