GBPUSD  reclaims 1.1400 on weaker US Dollar

• The GBPUSD is trading solidly in the green, gaining 0.81% at the beginning of the week.
• Mixed US employment report and speculations for a softer Federal Reserve keep risk-perceived currencies underpinned.
• Last week’s BoE’s dovish 75 bps weighed on the GBP, but US midterm elections are a tailwind for the GBPUSD.

The British Pound extended its gains during the North American session due to upbeat market sentiment spurred by a seasonal US mid-term elections rally. At the same time, investors brace for there results of the latter, and the October US Consumer Price Index (CPI), which depending on its outcome, will add/ease pressure on the Federal Reserve. Even though the Bank of England (BoE), said that they would hike rates, but not at the level money market futures priced in, the GBPUSD is trading above its opening price by 0.73%.

The Pound Sterling climbs on a soft US Dollar

In the last week, the US Department of Labor reported October’s data that the labor market remains tight, adding 261K jobs to the economy, usually perceived as hawkish for the Federal Reserve. Still, the Average Hourly Earnings eased from 5% in September to 4.7%, aligned with estimations, while, the Unemployment Rate edged up from 3.5% to 3.7%, suggesting the effects of monetary policy began to affect the labor market.

Aside from this, some Fed officials during the last week, led by Susan Collins of the Boston Fed, said that rates need to go higher than expected in September, though she said that it makes sense to move slowly to balance inflation/growth risks. In the meantime, Richmond Fed President Thomas Barkin said it is “conceivable” that the Federal funds rate (FFR) will end above 5%, and he foresees a potentially higher peak.

Elsewhere, the US midterm elections are weighing on risk-off assets like the US Dollar.

On the UK side, last Thursday, the Bank of England lifted rates by 75 bps, its highest increase in 33 years, though in words from Governor Andrew Bailey clarified that the peak in rates will be “lower than priced into financial markets.” Once the headline crossed newswires, the GBPUSD tumbled from 1.1420s to 1.1150s.

Nevertheless, uncertainty in the US political scenario and the US Consumer Price Index (CPI) report looming, refrained investors from opening fresh bets in the USD, even though it is sought as a safe haven.

That said, the US Dollar Index, which tracks the greenback’s value against six currencies, falls by 0.37%., at 110.382, bolstering the GBP. It should be noted most G8 currencies are boosted by negative sentiment surrounding the American Dolla, even though fundamentals have not changed.

GBPUSD Price Analysis: Technical outlook

The GBPUSD daily chart suggests the pair remains neutral-to-downward biased, even though it cleared the 50-day Exponential Moving Average (EMA). Although the recovery is remarkable, it would need to clear the confluence of the 100-day EMA and the September 13 swing high at around 1.1683/1.1738, so the bias could shift to neutral, as that could open the door for a test of the 1.2000 figure. The Relative Strength Index (RSI), at bullish territory, suggests that buyers are gathering momentum, so a correction to the 100-day EMA is on the cards.