GBPUSD stays on recovery mode amid hawkish BoE talks, focus on UK/US statistics

Monday morning feels slow for traders due to a light calendar in the Asia-Pacific region and Japan’s holiday. Traders are also on edge because there were no major updates last week and they’re cautious before key inflation, employment, and growth reports from major economies.

Even with the slow market and Japan's holiday, the USDJPY is leading among G10 currencies because traders expect no more interest rate hikes from the Bank of Japan. Next is USDCHF, which is showing slight gains.

EURUSD has stopped falling after four days, though it still lacks strong upward momentum, while GBPUSD is rising for the third day in a row. AUDUSD and NZDUSD are both showing small gains, while USDCAD is directionless after falling for six days, especially with higher Crude Oil prices. Oil prices are up due to increasing geopolitical tensions in the Middle East, and Gold is also rising for the third consecutive day.

BTCUSD and ETHUSD are under pressure, with both falling back after a brief recovery from multi-week lows last week.

Following are the latest moves of the key assets:

• WTI Crude oil rises for the fourth consecutive day as buyers attack $77.50 by the press time.
• Gold also remains firm for the third day in a row, up 0.25% intraday near $2,440 at the latest.
• The USD Index lacks clear directions while making rounds to 103.20 as we write.
• Wall Street closed with mild gains and the Asia-Pacific shares edged higher. That said, equities in Britain and Europe posted mild gains during the initial trading hour.
• BTCUSD and ETHUSD both drop nearly 1.0% each to $58,100 and $2,540 respectively at the latest.

US Dollar lacks clear directions…

After a quiet week with no major events or data, Fed Governor Michelle Bowman spoke on Saturday, supporting the Fed's tough stance on interest rates. She highlighted risks of rising inflation and cautiousness about rate cuts. In contrast, Boston Fed President Susan Collins had earlier suggested that easing rates might be appropriate if upcoming data aligns with expectations.

The recent improvement in US employment figures boosted the US Dollar towards the end of last week. However, mixed messages from the Fed kept the Dollar under pressure, though the US Dollar Index (DXY) was slightly up early Monday.

With the DXY rising, comments from former Bank of Japan (BoJ) board member Sakurai helped the USDJPY stay strong after ending a four-week decline.

EURUSD is gaining as last week’s EU data was underwhelming, and GBPUSD is maintaining its previous gains. Bank of England (BoE) policymaker Catherine Mann expressed ongoing concerns about inflation risks. Conversely, a UK survey reported the lowest expected pay rises in two years. UK economic data this week could impact GBPUSD if it signals further BoE rate cuts and weaker UK economic conditions.

In Australia, Deputy Governor Andrew Hauser mentioned uncertainty in economic forecasts and savings rates. Despite challenges from Hauser’s comments and concerns about China, the AUDUSD is slightly up after its first weekly gain in four weeks. Similarly, NZDUSD is steady ahead of the Reserve Bank of New Zealand’s (RBNZ) interest rate decision this week, though opinions among analysts are mixed.

Geopolitical tensions in the Middle East escalated over the weekend, with Israel on high alert due to expected attacks from Iran. The US has responded by deploying a missile submarine and accelerating the arrival of the Abraham Lincoln carrier group. These developments, along with hurricane fears, have supported Oil prices. However, reports of reduced Saudi exports to China in September and upcoming OPEC reports are putting pressure on Oil prices.

Gold prices are also benefiting from market uncertainty, pre-data anxiety, and geopolitical tensions. This week’s US consumer data will be important for determining future market direction.

• Strong buy: USDCAD, USDJPY, US Dollar, Silver
• Strong sell: AUDUSD, NZDUSD, GBPUSD
• Buy: BTCUSD, ETHUSD, Nasdaq, Gold, DJI30, USDCNH
• Sell: DAX, FTSE 100, EURUSD, Crude Oil

India inflation, OPEC report and US Monthly Budget Statement eyed…

Moving forward, a light schedule is expected to limit market activity before the US markets open. Key items to watch include India's Consumer Price Index (CPI) and Industrial Production reports, along with OPEC’s monthly Oil report and the US monthly budget statement. Risk headlines from the Middle East and comments from central bankers will also be important.

This week, US consumer demand growth and inflation data will be crucial. These factors could increase market volatility, especially if the Fed's dovish stance is confirmed, which might put pressure on the US Dollar.

May the trading luck be with you!