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The Pound Sterling (GBP) continued its downward trajectory on Thursday, struggling to maintain its position above the 1.3000 level against the US Dollar (USD). This decline was primarily driven by a combination of factors, including stronger-than-expected US economic data and growing optimism about a Donald Trump victory in the upcoming US presidential election.
US Economic Indicators Support the Dollar
The US Retail Sales for September surpassed market expectations, rising by 0.4% month-over-month. Additionally, Initial Jobless Claims fell to 241K, indicating a resilient labor market. These positive economic indicators strengthened the US Dollar and reduced expectations for significant interest rate cuts by the Federal Reserve (Fed).
Trump Optimism Fuels the Dollar
The increasing likelihood of a Trump victory in the US presidential election also contributed to the US Dollar’s appreciation. Investors anticipate that a Trump administration would implement policies that could benefit the US economy and currency, such as looser financial conditions, higher import tariffs, and tax cuts.
Pound Sterling Under Pressure
The Pound Sterling faced additional pressure due to slowing UK inflation, which has increased expectations for the Bank of England (BoE) to adopt a more dovish monetary policy. The UK Consumer Price Index (CPI) fell to 1.7% in September, below the BoE’s target of 2%. This deceleration in inflation has led to bets on interest rate cuts in the coming months.
Technical Analysis
From a technical perspective, the Pound Sterling’s near-term outlook appears bearish. The GBP/USD pair has broken below key support levels and is facing downward pressure from both the 20-day and 50-day Exponential Moving Averages (EMAs). The Relative Strength Index (RSI) has also fallen below 40, indicating a bearish momentum.
The Pound Sterling is currently under pressure due to a confluence of factors, including stronger US economic data, rising Trump expectations, and slowing UK inflation. If these trends continue, the GBP/USD pair could face further downside. Additionally, geopolitical tensions and global economic uncertainties could also impact the Pound Sterling’s performance.
