FX.co ★ GBP/USD

The GBP/USD pair traded quietly on the first trading day of the week, within a defined range, in stark contrast to the sharp decline seen in the EUR/USD pair. Sterling has maintained its sideways movement for the third consecutive week on hourly and four-hour charts, reinforcing its multi-week sideways structure, which is also reflected on daily and weekly charts. This consolidation helps explain why sterling has withstood renewed selling pressure on the euro, despite the two currencies having very similar fundamentals, with the exception of their differing central bank monetary policy stances. The European Central Bank has implemented two rounds of monetary tightening, while the Bank of England is now preparing to launch its own interest rate hike cycle – theoretically, this divergence should make sterling appear weaker than the euro. However, recent monetary policy moves often defy conventional analytical logic; market participants can easily point to the UK's greater energy independence compared to the EU, which logically should favor sterling over the euro. Meanwhile, the UK faces its own challenges, including a widening budget deficit, rising government bond yields, and ongoing political debates within the new government about potential institutional restructuring a decade after Brexit. Looking ahead to upcoming macroeconomic catalysts, financial experts unanimously agree that the highly anticipated US inflation report is the focus this week. However, from a deeper structural perspective, the upcoming Consumer Price Index (CPI) data may not be as accurate as it appears, as the dollar continues to strengthen regardless of changes in the Federal Reserve's rhetoric in the short term. The view that expectations of interest rate hikes are the sole driver of the dollar's strength is becoming increasingly untenable, especially after the Federal Open Market Committee's (FOMC) dot chart released on September 18 indicated that the Fed may raise interest rates only once more before the end of the year. With Fed policymakers recognizing that a single rate hike is insufficient to sustainably return inflation to the 2% target, monetary policy will inevitably require further tightening over a longer period. Given the committee's reluctance to make hasty adjustments, any further action is likely to be postponed until December. Therefore, while September's inflation data may have a slight impact on market sentiment in the short term, it is unlikely to alter the overall upward trend of the dollar. As for the British pound, its spot price stability is heavily dependent on the integrity of its overlapping sideways channels, with spot prices currently hovering near the lower boundary of these channels. Over the past five days, the average volatility of the GBP/USD exchange rate has been 67 basis points, reflecting typical range-bound trading. Price action on Tuesday, October 13, is expected to remain within the range between the support level of 1.3149 and the resistance level of 1.3283, as indicated by the descending linear regression channel. The Commodity Channel Index (CCI) provides a positive technical balance, having twice dipped into oversold territory, sending an encouraging signal that the downward momentum is nearing its end and increasing the likelihood of an upward corrective reversal.