GBP/USD, DAX Forecast: Two trades to watch

GBP/USD tests 1.30 ahead of BoE’s Bailey & next week’s Budget

UK PSNB rose to £16.6 billion, the third highest ever for September
BoE Andrew Bailey is due to speak
USD hovers around a 2.5-month high
GBP/USD tests 1.30 support

GBP/USD is rising, recovering some of yesterday’s losses as the USD rally pauses for breath.

However, GBP gins could be limited after the latest public finance figures highlight the pressures on Chancellor Rachel Reeves ahead of next week's budget.

The UK posted a larger government deficit than expected in the first half of the fiscal year, putting pressure on the Chancellor to raise taxes and borrow more to cover high spending.

Public sector net borrowing was -£16.6 billion, below expectations of -£17.5 billion, but the deficit is still the third-highest borrowing on record for the month.

Attention will also be on Bank of England Governor Andrew Bailey, who is due to speak later today. The last time that Bailey spoke, at the start of October, he sent the pound sharply lower, saying that the central bank could cut rates more aggressively if inflation data allowed it. With inflation now below the BoE’s 2% target, Bailey could point to further rate cuts. However, he may also adopt a cautious approach ahead of the October 30 budget.

The USD is hovering around a 2.5-month high on Tuesday, based on expectations that the Federal Reserve will adopt a slower approach to cutting interest rates. The upcoming US elections are also keeping investors on edge.

Rising treasury yields have boosted the U.S. dollar after recent data showed that the US economy continues to be in a good place. This could mean that the Fed won’t be able to cut rates as rapidly as initially expected.

Fed speakers expressed support for further cuts but differed over the timing of those cuts, which points to more mixed views at the Fed meeting in November. Markets are pricing in an 89 percent chance of the Fed cutting rates by 25 basis points next month, down from a 50% chance just a month earlier, when investors also considered the Fed may cut rates by 50 basis points.

GBP/USD Forecast – technical analysis

GBP/USD fell from 1.3420 high at the start of October and continues to test the key 1.30 psychological level support. Below 1.30, a lower low is formed.

Sellers supported by the RSI will look to take out this level and the 100 SMA at 1.2960 to expose the rising trendline support at 1.29.

Buyers will look to defend 1.30 to recover towards 1.31, last week’s high, and on towards 1.32, the round number.

DAX hovers around record highs ahead of Lagarde & IMF growth forecasts

ECB Christine Lagarde is due to speak
IMF global growth forecasts will be released
DAX eases from its record-high

The DAX and its European peers have opened lower as concerns over geopolitical tensions and macroeconomic uncertainty offset a possible boost from positive earnings.

With the US election just two weeks away, traders are showing signs of nerves. They also question the Federal Reserve's ability to lower interest rates as fast as they initially expected.

Meanwhile, the DAX has been supported by lower interest rates after the ECB cut rates for a third time last week. ECB president Christine Lagarde is due to speak today along with chief economist Philip Lane and several other ECB officials. Investors will be looking for further insight into the ECB’s plans for future rate cuts. The markets expect the ECB to cut rates again in December as its focus shifts away from inflation and towards the deteriorating growth outlook.

German PPI data yesterday showed that wholesale inflation fell -1.4% YoY, more than the expected- 0.8%. The data pointed to a weaker demand environment.

On the company front, shares in SAP were up 4.4% after the German software company raised its full-year targets based on its strong cloud business.

Today, the German economic calendar is quiet. Instead, attention will be on the IMF's release of its World Economic Outlook figures, where growth projections for both China and the US could influence demand for the darks. Expectations of 5% growth in China and a resilient U.S. economy could help the ducks back up towards all-time highs.

DAX forecast – technical analysis

The DAX consolidates below yesterday's record high of 19.680. Supported by the RSI above 50, buyers will look to extend gains above her to fresh record highs. However, the price remains above the 19,480 level, which sellers would need to break below to negate the near-term uptrend. Below here, 19000 comes into focus.

StoneX Europe Ltd makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. We are not under any obligation to update any such material. Any opinion made may be personal to the author and may not reflect the opinion of StoneX Europe Ltd.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Please ensure you fully understand the risks involved by reading our full risk warning.

FOREX.com is a trading name of StoneX Europe Limited, and FOREX.com/ie is a domain operated by StoneX Europe Ltd, a member of StoneX Group Inc. StoneX Europe Ltd, is a Cyprus Investment Firm (CIF) company registered to the Department of Registrar of Companies and Official Receiver with a Registration Number HE409708, and authorized and regulated by the Cyprus Securities & Exchange Commission (CySEC) under license number 400/21. StoneX Europe is a Member of the Investor Compensation Fund (ICF) and has its registered address at Nikokreontos 2, 5th Floor, 1066 Nicosia, Cyprus.

StoneX Europe Limited is registered with the German Federal Financial Supervisory Authority (BaFin). BaFin registration ID: 10160255

FOREX.com is a trademark of StoneX Europe Ltd, a member of StoneX Group Inc.

The statistical data and the awards received refer to the Global FOREX.com brand.

This website uses cookies to provide you with the very best experience and to know you better. By visiting our website with your browser set to allow cookies, you consent to our use of cookies as described in our Privacy Policy.

Through passporting, StoneX Europe is allowed to provide its services and products on a cross-border basis to the following European Economic Area ("EEA") states: Austria, Bulgaria, Croatia, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden.

Additionally, StoneX Europe Ltd is allowed to provide Investment and Ancillary Services to the following non-EU jurisdiction: Switzerland.

StoneX Europe Ltd products, services and information are not intended for residents other than the ones stated above.

Tied Agent Information: KQ Markets Europe Ltd with Company No. HE427857.
Address: Athalassas 62, Mezzanine, Strovolos, Nicosia Cyprus.
Services Provided: Reception and Transmission of Orders.
Commencement Date: 06/12/2022
Website: KQ Markets - CFD Trading | KQ Markets

We may pay inducements, such as commissions or fees, to affiliates or third-party introducers for referring clients to us. This is in line with regulatory guidelines and fully disclosed where applicable.

StoneX Europe Ltd may make third party material available on this website which may contain information included but not limited to the conditions of financial markets. The material is for information purposes only and does not contain, and should not be construed as containing, investment advice and/or investment recommendation and/or an investment research and/or an offer of or solicitation for any transactions in financial instruments; any decision to enter into a specific transaction shall be made by the client following an assessment by him/her of their situation. StoneX Europe Ltd makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. We are not under any obligation to update any such material. Any opinion made may be personal to the author and may not reflect the opinion of StoneX Europe Ltd.