Pound Sterling remains soft as dovish expectations from BoE escalate, Q3 GDP eyed
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<li><strong>Pound Sterling struggles for a direction as investors shift focus to the Q3 GDP data.</strong></li>
<li><strong>A poor GDP report would elevate dovish expectations from various BoE policymakers.</strong></li>
<li><strong>Rising energy prices have squeezed the UK’s consumer spending.</strong></li>
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<p>The Pound Sterling (GBP) is stuck in a tight range as investors seem unwilling to build fresh positions ahead of the release of the UK Q3 Gross Domestic Product (GDP) data, published on Friday at 07:00 GMT. The GBP/USD pair remains on tenterhooks as the Q3 GDP report will shape December’s monetary policy outlook of the <a href="https://www.fxstreet.com/macroeconomics/central-banks/boe">Bank of England</a> (BoE).</p>
<p>A decline in consumer spending, poor Services <a href="https://www.fxstreet.com/economic-calendar/united-states">PMI</a>, postponed demand for housing, and contracting hiring have set a negative undertone for the UK’s economic performance in the July-September period. A poor GDP report would elevate dovish expectations from various BoE policymakers, especially from Swati Dhingra, who favors cutting rates if the growth rate remains below expectations. GDP data will be followed by employment and inflation data, which will be released next week.</p>
<h2>Daily Digest Market Movers: Pound Sterling consolidates ahead of Powell’s speech</h2>
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<li>Pound Sterling consolidates in a narrow range below the crucial 1.2300 resistance level as investors await UK factory data for September and Q3 GDP data, which will inform December’s monetary policy decision by the Bank of England.</li>
<li>The data is expected to show Manufacturing Production rose by 0.3% in the month of September versus the 0.8% decline in August. YoY the data is expected to show a 3.1% rise against the 2.8% recorded previously. </li>
<li>Industrial Production is forecast to show a rise of 0.1% against a 0.7% decline in the previous period. The same data is forecast to show a 1.1% increase YoY compared to 1.3% previously. </li>
<li>An uptick in factory data would ease fears of a slowdown in the UK economy.</li>
<li>The show-stopper event that would guide further action in the Pound Sterling is the preliminary Q3 GDP data, which will be released at the same time as the factory data at 07:00 GMT.</li>
<li>Economists have forecasted a nominal contraction of 0.1% against a 0.2% growth rate in the prior April-June quarter. UK firms underutilized their production capacities to avoid piling up unsold inventories amid a poor demand environment.</li>
<li>The data from the Office for National Statistics (ONS) showed that consumer spending contracted in two out of three months in the third quarter as higher energy costs squeezed the real income of households.</li>
<li>The UK economy is heavily reliant on the service industry: the Services PMI contracted in all months of the last quarter. </li>
<li>BoE policymaker Swati Dhingra, who supported keeping interest rates unchanged last week, could emphasize cutting rates sooner if the Q3 GDP report turns out excessively weak.</li>
<li>This week, BoE Chief Economist Huw Pill warned about the potential risks of an excessive slowdown as the central bank is committed to keeping monetary policy sufficiently restrictive for a longer period till the achievement of price stability.</li>
<li>Huw Pill said rate cuts in mid-2024 “don’t seem totally unreasonable” and a weak GDP report would prompt dovish expectations from the BoE.</li>
<li>The US Dollar drops to near 105.50 after failing to recapture the crucial resistance at 106.00. Investors await Federal Reserve (Fed) Chair Jerome Powell’s guidance on interest rates.</li>
<li>This week, a balanced tone from Fed policymakers on the interest rate outlook has kept the US Dollar Index (DXY) broadly sideways in a range of 105.40-105.90.</li>
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<h2>Technical Analysis: Pound Sterling hovers below 1.2300</h2>
<p><a href="https://editorial.fxstreet.com/miscelaneous/GBP_USD%20(1)-638351136132631444.png" target="_blank" rel="noopener"><img decoding="async" src="https://editorial.fxstreet.com/miscelaneous/GBP_USD%20(1)-638351136132631444.png" style="width: 600px; height: 270px;" /></a></p>
<p>Pound Sterling trades lackluster near 1.2300 after correcting gradually in the past three trading sessions. The chances of a recovery in the Pound Sterling are decent. </p>
<p><a href="https://www.fxstreet.com/currencies/gbpusd">The GBP/USD pair</a> delivered a breakout of a symmetrical triangle <a href="https://www.fxstreet.com/rates-charts/chart">chart</a> pattern last week and the process of testing the breakout with gradual selling seems over. The Cable has stabilized above the 20-day Exponential Moving Average (EMA) but the 200-day EMA is still acting as a barricade.</p>
<p><!–FAQ CONTENT MODULE STARTS HERE–></p>
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<h2>BoE FAQs</h2>
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<p>The Bank of England (BoE) decides monetary policy for the United Kingdom. Its primary goal is to achieve ‘price stability’, or a steady inflation rate of 2%. Its tool for achieving this is via the adjustment of base lending rates. The BoE sets the rate at which it lends to commercial banks and banks lend to each other, determining the level of interest rates in the economy overall. This also impacts the value of the Pound Sterling (GBP).</p>
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<p>When inflation is above the Bank of England’s target it responds by raising interest rates, making it more expensive for people and businesses to access credit. This is positive for the Pound Sterling because higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls below target, it is a sign economic growth is slowing, and the BoE will consider lowering interest rates to cheapen credit in the hope businesses will borrow to invest in growth-generating projects – a negative for the Pound Sterling.</p>
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<p>In extreme situations, the Bank of England can enact a policy called Quantitative Easing (QE). QE is the process by which the BoE substantially increases the flow of credit in a stuck financial system. QE is a last resort policy when lowering interest rates will not achieve the necessary result. The process of QE involves the BoE printing money to buy assets – usually government or AAA-rated corporate bonds – from banks and other financial institutions. QE usually results in a weaker Pound Sterling.</p>
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<p>Quantitative tightening (QT) is the reverse of QE, enacted when the economy is strengthening and inflation starts rising. Whilst in QE the Bank of England (BoE) purchases government and corporate bonds from financial institutions to encourage them to lend; in QT, the BoE stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive for the Pound Sterling.</p>
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<p><!–FAQ CONTENT MODULE ENDS HERE–></div></div>
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<br /><a href="https://www.fxstreet.com/news/pound-sterling-consolidates-ahead-of-q3-gdp-data-202311090759">Source link </a></p><p>The post <a href="https://forextraderhub.com/pound-sterling-remains-soft-as-dovish-expectations-from-boe-escalate-q3-gdp-eyed.html">Pound Sterling remains soft as dovish expectations from BoE escalate, Q3 GDP eyed</a> first appeared on <a href="https://forextraderhub.com">Forex Trader Hub</a>.</p>
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