GBP/USD Forecast: Bailey hints at aggressive rate cuts

• BoE Governor Bailey said the central bank could become aggressive on tapering if inflation eases.

• US ADP nonfarm payrolls rose by 143,000 in September.

• Economists expect the US economy to add 148,000 jobs in September.

The GBP/USD forecast shows a sharp increase in bearish momentum following dovish comments from Bank of England Governor Bailey. At the same time, the dollar was firm after private employment numbers beat estimates.

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The pound fell to a two-week low after BoE Governor Bailey said the central bank could become aggressive on tapering if inflation behaves well. A more convenient outlook means more rate cuts. As a result, market participants increased the probability of a rate cut in November to 90%.

However, Bailey noted the risk of oil prices rising due to rising tensions in the Middle East. A rise in fuel prices could lead to a rise in inflation that would cause most major central banks to shut down. However, at this point, it remains only a risk.

On the other hand, the US dollar strengthened on Wednesday after US employment rose more than expected. ADP nonfarm payrolls rose 143,000 in September, beating expectations for 124,000. The report suggested a slow approach to interest rate cuts by the Fed. In a recent speech, Fed Chairman Powell noted that the central bank could implement two more cuts this year, each by 25 basis points.

However, all eyes are on the nonfarm payrolls report, which could change that outlook. Economists expect the U.S. economy to add 148,000 jobs in September, slightly above the previous month’s increase. On the other hand, the unemployment rate could remain steady at 4.2%. Before that, traders will watch jobless claims to see the state of the labor market.

GBP/USD Key Events

• US Jobless Claims
• US ISM Services PMI

GBP/USD Technical Forecast: Bear Channel Eruption

Technically, the GBP/USD price has broken below the 1.3200 support level. The bearish bias is strong as the price has fallen well below the 30-SMA. At the same time, the RSI is trading in the oversold region, indicating massive bearish momentum.

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The decline came after the RSI made a bearish divergence with the price. Initially, the bulls kept the price in a bullish channel. However, after the RSI showed weakness, the bears took control by breaching the SMA and channel support. If the downtrend continues, the price will soon reach the 1.3051 support level.

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