GBP to USD Forecast: The BoE, the Fed, and Geopolitics in Focus – Nasdaq

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Highlights

• On Friday, GBP/USD fell by 0.27%, following a 1.13% loss on Thursday.
• A BoE Chief Economist Huw Pill speech on the UK economy and inflation will gain attention on Monday.
• Fed speeches and geopolitical updates from the Middle East may also impact investor sentiment.

Overview of the Friday Session

On Friday, the GBP/USD declined by 0.27%. Following a 1.13% slide on Thursday, the GBP/USD pair ended the day at $1.21418. The GBP to USD pair rose to a high of $1.22253 before falling to a low of $1.21223.

Bank of England Chief Economist Huw Pill in the Spotlight

Bank of England (BoE) Chief Economist Huw Pill will speak at the OMFIF Economic and Monetary Policy Institute on Monday. Forward guidance on the UK economy, inflation, and monetary policy will garner investor interest.

Huw Pill recently spoke about the commitment to maintaining inflation at 2% and suggested that monetary policy decisions are becoming finely balanced. His views may influence the buyer appetite for the Pound.

Governor Andrew Bailey held a similar view on monetary policy. On Friday, the BoE Governor reportedly said,

“Our last meeting was such a tight one. And as my colleague (BoE Chief Economist) Huw Pill said this week, they’re going to go on being tight ones.”

NY Empire State Manufacturing and the Fed in Focus

Later today, the NY Empire State Manufacturing Index will draw investor interest. The US manufacturing sector accounts for less than 25% of the US economy. However, a slide in activity could reignite fears of a hard landing. Economists forecast the NY State Manufacturing Index to fall from 1.9 to -7 in October.

Beyond the numbers, Fed speeches will continue to affect sentiment toward Fed interest rate decisions. FOMC voting member Patrick Harker is on the economic calendar to speak. On Friday, Harker favored leaving interest rates unchanged. A shift to a more hawkish policy stance would fuel demand for the US dollar.

Away from theeconomic calendar news updates from the Middle East also warrant consideration. An escalation in the conflict would see investors move to the safety of the US dollar.

Short-Term Forecast

The GBP/USD sits in the hands of central bankers and news from the Middle East. A hawkish Fed and increased Middle East tensions could drive GBP/USD below $1.21. Conversely, dovish Fed comments and easing geopolitical tensions might push it above the $1.22150 resistance level.

GBP to USD Price Action

GBPUSD 161023 Weekly Chart

Daily Chart

The GBP/USD pair sat below the 50-day and 200-day EMAs, affirming bearish price signals. Significantly, the 50-day EMA fell back from the 200-day EMA, another bearish signal.

Hawkish Fed comments and market risk aversion would bring sub-$1.21 into play. A drop below $1.21 would support a move toward the $1.19055 support level.

However, dovish Fed commentary and easing geopolitical tensions would support a break above the $1.22150 resistance level. Bank of England Chief Economist Huw Pill may influence the appetite for the Pound.

The 14-period daily RSI reading of 38.61 indicates a GBP/USD fall below $1.21 before entering oversold territory.

GBPUSD 161023 Daily Chart

4-Hourly Chart

The GBP/USD hovers below the 50-day and the 200-day EMAs, reaffirming bearish price signals.

A GBP/USD break above the 50-day EMA and the $1.22150 resistance level would bring the 200-day EMA into view. Selling pressure will intensify at $1.22130. The 50-day EMA is confluent with the $1.22150 resistance level.

However, a fall below $1.21 would support a move toward the $1.19055 support level.

With an RSI reading of 39.80 for the 14-period 4-hourly Chart, the GBP/USD could drop below $1.21 before entering oversold territory.

GBPUSD 161023 4 Hourly Chart

This article was originally posted on FX Empire

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