• The dollar recovered as investors sought safety amid rising Middle East tensions.

• Market participants are pricing a 59% chance of another 50-bps rate cut in November.

• Sterling has gained about 5.4% against the dollar this year.

The GBP/USD forecast shows a sudden shift in sentiment to bearish as the dollar recovers from a 14-month low. At the same time, the pound was weak as recent economic data pointed to a dimmer outlook.

The dollar recovered against most currencies on Wednesday and Thursday as investors sought safety amid rising Middle East tensions. The conflict between Hezbollah and Israel in Lebanon has escalated, with the two groups exchanging missiles. The US and other partners announced they were working tirelessly to avoid a full-blown war between the two.

Despite the dollar’s rebound, fundamentals point to more downside. The Fed recently cut interest rates by a massive 50-bps, starting a long-awaited easing cycle. The rate cut sent the greenback to fresh lows before it recovered. However, the US central bank flagged more rate cuts to come. As a result, market participants are pricing a 59% chance of another 50-bps rate cut in November.

Nevertheless, incoming data will continue to shape this outlook. The next major report is the core PCE index, which will show the state of inflation. Market participants will also watch GDP data later today.

On the other hand, the pound fell after data in the previous session revealed a significant drop in UK consumer sentiment. The figure fell from -8 to -21 in September. Moreover, it came after soft business activity data showed a slowdown in the economy. Still, sterling has gained about 5.4% against the dollar this year as the Bank of England delays rate cuts.

GBP/USD key events today

• US final GDP q/q
• US unemployment claims
• Fed Chair Powell Speaks

GBP/USD technical forecast: Solid bearish momentum

On the technical side, the GBP/USD price is trading in a tight, bullish channel with clear support and resistance lines. The price recently fell to the channel support after failing to sustain a move above the 1.3400 key level.

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The decline has paused at the support line, which coincides with the 30-SMA. Therefore, it might bounce higher to make a new high above 1.3400. However, if bears are strong enough to break below the support zone, the price might revisit the 1.3200 support level.

https://www.forexcrunch.com/blog/2024/09/26/gbp-usd-forecast-dollar-rebounds-from-14-month-low/