News

Euro recovery attempts against the British Pound have been capped at 0.8707 earlier on the day, and the pair retreated to levels right below 0.8700 amid a cautious market mood, although it remains above session lows, at 0.8685 so far.The Common currency is losing ground across the board on Monday mo

Sharp rebound in Euro (EUR) has scope to extend but is unlikely to reach 1.1655. In the longer run, the likelihood of EUR reaching the 1.1490 during this phase of weakness is decreasing, UOB Group’s FX analysts Quek Ser Leang and Peter Chia note.

Fundamental
Overview

The USD came under some
pressure on Friday as the risk-off sentiment caused by Trump’s threat of
substantially increasing tariffs on China weighed on Treasury yields. Over the
weekend, we had more soothing comments from Trump and other US officials which
triggered a recovery in risk sentiment.

The positive mood is
weighing a bit on the greenback amid lack of bullish catalysts. Domestically,
nothing has changed for the US dollar as the US government shutdown continues
to delay many key US economic reports. The dollar “repricing trade” needs strong
US data to keep going, especially on the labour market side, so any hiccup on
that front is likely to keep weighing on the greenback.

The market pricing shifted
more dovish with 47 bps of easing by year-end and 115 bps cumulatively by the
end of 2026. The BLS announced last week that it will release the US CPI report
despite the shutdown on October 24, so that’s going to be a key risk event. In
case we get hot data, we will likely see a hawkish repricing in interest rates
expectations with the December cut being priced out. Conversely, a soft report
shouldn’t change much in terms of pricing, but it will likely weigh on the
greenback anyway.

On the GBP side, we haven’t
got any meaningful change in the fundamentals. The BoE left interest rates
unchanged at the last meeting but slowed the pace of QT. The forward guidance
was mostly the same with the focus being more on the inflation side now. The UK
continues to have a serious inflation problem with high core CPI, high wages
and rising consumer inflation expectations.

The market is pricing just 7
bps of easing by year-end and 37 bps by the end of 2026. Tomorrow, we have the
UK employment report but it’s unlikely to change much unless we get big
deviations. The CPI next week should be more important for the BoE.

GBPUSD
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that GBPUSD broke through a key support zone around the 1.3334 level but
couldn’t sustain the breakout as the greenback weakened across the board on
Trump’s actions. The price rose above the support zone and this is where we can
expect the buyers to step in with a defined risk below the level to position
for a rally into the 1.3588 level. The sellers, on the other hand, will want to
see the price falling back below the support zone to pile in for a drop into
the 1.3140 level next.

GBPUSD Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see more clearly the upward spike and the price now trading right around the
support zone. Again, this is where we can expect the buyers to step in to target
new highs, while the sellers will look for a break lower to pile in for new
lows.

GBPUSD Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that we have a minor downward trendline defining the recent bearish momentum.
The sellers will likely continue to lean on the trendline with a defined risk
above it to keep pushing into new lows, while the buyers will look for a break
higher to increase the bullish bets into the next trendline. The red lines
define the average daily range for today.

Upcoming Catalysts

This week is going to be very light again in terms of data
releases given the US government shutdown. Data like Retail Sales and Jobless
Claims won’t be released. We will have lots of Fed speakers though with Fed
Chair Powell scheduled for tomorrow. Tomorrow, we will also get the UK
employment report and then the UK GDP on Thursday. The US CPI will be published
despite the shutdown, which is scheduled for Friday October 24.

This article was written by Giuseppe Dellamotta at investinglive.com.

Doing the same thing over and over again and expecting different results is often described as Albert Einstein’s definition of insanity.

Doing the same thing over and over again and expecting different results is often described as Albert Einstein’s definition of insanity.

The Canadian labour market figures for September, published on Friday, came as a pleasant surprise. Instead of the expected 5,000 jobs, the Canadian economy created more than 60,000 jobs, led by full-time positions. At the same time, the unemployment rate fell despite a higher participation rate.