GBP/USD hammered down to over two-week low, below mid-1.3100s on Bailey's dovish remarks

• GBP/USD comes under intense selling pressure in reaction to Bailey’s dovish remarks.
• Bailey hints at more aggressive rate cuts and weighs heavily on GBP amid a bullish USD.
• Reduced bets for a 50 bps Fed rate cut in November and geopolitical risks benefit the buck.

The GBP/USD pair continues losing ground for the third straight day – also marking the fourth day of a negative move in the previous four – and plummets to over a two-week low during the first half of the European session on Thursday. Spot prices currently trade below mid-1.3100s, down nearly 1.0% for the day, and seem vulnerable to decline further in the wake of Bank of England (BoE) Governor Andrew Bailey's dovish remarks. 

In an interview with the Guardian newspaper published this Thursday, Bailey said that there was a chance that the BoE could become a bit more aggressive in cutting rates if there's further good news on inflation. The markets were quick to react and are now pricing in a 90% chance of a 25 basis points interest cut at the next BoE meeting in November. This, in turn, weighs heavily on the British Pound (GBP), which, along with sustained US Dollar (USD) buying, contributes to the GBP/USD pair's steep intraday fall. 

The incoming US data pointed to a still resilient labor market and forced investors to scale back their expectations for a more aggressive policy easing by the Federal Reserve (Fed). This, along with geopolitical risks stemming from the ongoing conflicts in the Middle East, assists the safe-haven USD to prolong this week's recovery from its lowest level since July 2023. The USD Index (DXY), which tracks the Greenback against a basket of currencies, climbs to a three-week top and exerts additional pressure on the GBP/USD pair. 

With the latest leg down, spot prices now seem to have confirmed a breakdown below the 61.8% Fibonacci retracement level of the recent rally from the 1.3000 psychological mark, or the September monthly swing low. Furthermore, oscillators on the daily chart have just started gaining negative traction and suggest that the path of least resistance for the GBP/USD pair is to the downside. Traders now look to the US economic docket – featuring Weekly Jobless Claims and the ISM Services PMI – for short-term opportunities.