As Tensions rise in the Middle East GBP Faces Challenges, USD Remains Hawkish, EUR Falters on Eurozone Concerns.

GBP: Recent data reaffirmed the significant slowdown in the broader macroeconomic landscape in the UK since mid-August. The UK Economic Surprise Index has taken a sharp dip since that time, leading money markets to believe that UK interest rates have reached their peak. The Bank of England is expected to maintain benchmark rates at its upcoming meeting. In the GBP/USD pairing, resistance is evident at 1.2350, just below the 200-day moving average at approximately 1.2450. Breaking above 1.2350 would signal a decrease in immediate downward pressure, but for a more optimistic outlook, cable would need to surpass the Ichimoku cloud’s upper edge on the daily chart, near the mid-August high of 1.2825. Until such a shift occurs, the risk balance leans toward a downward trajectory, approaching the March low of 1.1800.

USD: In contrast, the US Federal Reserve’s projections indicate another rate hike by year-end, despite some moderation in hawkish rhetoric from several Fed officials this month. Additionally, US economic growth remains robust, with 3Q GDP data expected to show a resurgence to 4.3% from 2.1% in 2Q. Market attention is also focused on the PCE report to gauge price pressure moderation toward the Fed’s 2% target. The S&P Global Composite PMI for October demonstrated growth, climbing from 50.2 to 51.0. The Services PMI increased to 50.9, and the Manufacturing PMI rose to 50.0. With the manufacturing index staying above the 50-point threshold for the past six months, it signifies a positive trend in that sector.

EUR: The euro’s recent pullback is attributed to disappointing eurozone data. Notably, German business activity in October, as indicated by the S&P Global Composite PMI, slipped further into contraction territory, sparking concerns of a recession in Europe’s largest economy. More insights into the European Central Bank’s monetary policy will be revealed later this week. The institution, led by Christine Lagarde, is expected to pause after delivering 450 basis points of tightening over the past ten meetings.