The Pound Sterling (GBP) has risen by 0.3% against the US Dollar (USD), making it the strongest currency among the G10. This rise comes after better-than-expected domestic data, especially reports on trade and industrial production from August. This positive data creates a good balance against the earlier disappointing employment numbers. Market sentiment plays a key role in GBP’s performance, especially with the upcoming budget announcement on November 26.

Technical Indicators

Technical indicators show the Relative Strength Index (RSI) at 50, with GBP approaching the 50-day moving average of 1.3476. There is minimal resistance before reaching 1.35, indicating a possible short-term range between 1.3380 and 1.3480. With the British Pound gaining strength, we view the 1.3380 to 1.3480 range as a potential area for short-term trading. The positive trade and production surprises from August provide a strong foundation for the currency. This good news contrasts with the weaker employment figures released earlier this week. This fundamental strength is backed by recent inflation data, which keeps the Bank of England vigilant. Last week’s September Consumer Price Index (CPI) showed inflation steady at 2.3%, just above the Bank’s target. This suggests that the central bank is unlikely to cut rates soon, supporting the Pound. For derivative traders, selling out-of-the-money puts below the 1.3380 support level might be a good strategy to earn premiums. With the RSI neutral at 50, a major breakout is not expected until more news comes out. We also see a decrease in implied volatility, making options cheaper for the time being.

Market Sentiment and Upcoming Events

The key event approaching is the budget announcement on November 26, which is impacting market sentiment. Traders, after the fiscal uncertainty of previous years, are looking for reassurance and will react strongly to any surprises. This makes buying straddles a smart strategy as we near November, readying for a significant move in either direction. On the other side, recent data from the US shows core inflation slowly declining, now at 2.5%. This lessens pressure on the US Federal Reserve to act aggressively with its policies. The stability of the Bank of England compared to a more cautious Fed is pushing GBP/USD toward the 1.35 resistance level. Create your live VT Markets account and start trading now.

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