Pound Sterling consolidates against US Dollar as Senate advances stopgap bill

• The Pound Sterling trades in a tight range around 1.3150 against the US Dollar as market mood improves.
• The US federal reopening would improve households' sentiment.
• Investors await UK employment for the three months ending September and Q3 preliminary GDP data.

The Pound Sterling (GBP) consolidates near 1.3150 against the US Dollar (USD) during the European trading session on Monday. The GBP/USD pair wobbles as the US Dollar (USD) steadies despite the vote favoring the United States (US) government reopening has been approved in the Senate.

At the press time, the US Dollar Index (DXY), which tracks the Greenback's value against six major currencies, trades flat around 99.65.

Democrats agreed to support the approval of a stopgap bill with Republicans, which will fund certain government departments through January 30, in exchange for extending subsidies under the Affordable Care Act.

The scenario of US federal reopening would improve consumer sentiment, which has been hit badly in the past few weeks. On Friday, the preliminary Michigan Consumer Sentiment Index came in at 50.3 in November, the lowest figure in three and a half years.

Daily digest market movers: Pound Sterling weakens as BoE dovish bets accelerate

• The Pound Sterling trades lower against its major currency peers at the start of the week. The British currency faces selling pressure amid growing expectations that the Bank of England (BoE) will cut interest rates at its December policy meeting.
• Analysts at Morgan Stanley, Citigroup, and UBS Global Research have shifted their stance towards the December policy meeting and expect the BoE to cut interest rates by 25 basis points (bps) to 3.75%.
• BoE dovish expectations have been prompted due to a change in the central bank's language on the monetary policy guidance. The central bank eliminated "careful" from its guidance of "gradual downward monetary policy path" in the monetary policy announcement on Thursday, which it stressed in the September policy meeting.
• In the last week's monetary policy announcement, the BoE held its interest rates steady at 4%, with 5-4 majority.
• This week, the major trigger for the Pound Sterling will be the United Kingdom (UK) labour market data for the three months ending September, and preliminary Q3 Gross Domestic Product (GDP), which will be released on Tuesday and Thursday, respectively.
• Economists expect the ILO Unemployment Rate to have accelerated to 4.9% from the prior release of 4.8%. Signs of weakening job market conditions would further prompt BoE dovish expectations.

Technical Analysis: Pound Sterling trades flat around 1.3150

The Pound Sterling flattens around 1.3150 against the US Dollar on Monday, holding above an over six-month low around 1.3000 posted on Tuesday. The overall trend of the pair remains bearish as it trades below the 200-day Exponential Moving Average (EMA), which is around 1.3268.

The 14-day Relative Strength Index (RSI) recovers to near 40.00. A fresh bearish momentum would emerge if the RSI resumes its downside journey.

Looking down, the April low near 1.2700 will act as a key support zone. On the upside, the October 28 high around 1.3370 will act as a key barrier.