Daily Price Outlook
GBP/USD is currently trading at 1.2475, representing a 0.06% loss in value over the past 24 hours. The recent slight recovery of the USD Index and the risk-off market sentiment have contributed to a significant drop in the value of this currency pair.
Dollar Edges Higher, Putting Pressure on GBP/USD
On Monday, there was a lack of macroeconomic data in the US. However, according to the Dallas Fed Manufacturing index released on April 24, the index declined from -15.7 in March to -23.4 in April, falling below the -14.6 analyst expectation. The poor economic data supported hawkish market opinions towards the Fed's monetary policies.
The CME FedWatchTool showed an increase in the probability of a 25 basis point increase in interest rates in May to 84%. The likelihood of a rise in June also rose to 24.7%.
Additionally, the USD Index (DXY) slightly recovered to 101.42 as investors anticipate the US GDP report on Thursday and believe the US core CPI's stickiness may force the Fed to maintain its hawkish stance on interest rate policy.
As a result, the GBP/USD pair fell due to Cable detecting selling pressure and DXY rebounding. Furthermore, unfavorable market sentiment continues to drag on risky assets.
Looking ahead, the April US consumer confidence numbers will be of interest in the US economic calendar today. The PCE price index, which is the Fed's preferred inflation indicator, is also coming later this week.
Bank of England Considers Further Rate Hike Amidst Economic Recovery
In the UK, the Bank of England (BoE) is expected to adopt a hawkish monetary policy as the country's inflation rate remains stuck at double digits due to labor shortages and high food prices. UK food inflation has hit a 45-year high of 19.1%. Aggressive policy changes may, however, expose the UK economy to the risk of recession.
Market expectations are that BoE governor Andrew Bailey will raise interest rates by another 25 basis points to curb persistent inflation.
BoE Deputy Governor Dave Ramsden indicated last Friday that the central bank must stop excessive inflation from becoming a permanent fixture in the economy. He noted that inflation was still showing signs of persistently rising.
Today, Ben Broadbent, a member of the monetary policy committee, is expected to speak. Similar views on inflation and the need for further rate hikes could impact the GBP/USD exchange rate.
Daily Technical Levels
Pivot Point: 1.2460
GBP/USD – Technical Outlook
On Tuesday, the GBP/USD currency pair was trading at the 1.2488 level and facing strong resistance around 1.2508. As the pair was already in the overbought zone and facing resistance around the 1.2500 level, sellers triggered a corrective move and completed a 23.6% Fibonacci retracement at the 1.2475 level.
If the pair continues to drop below this level, it could potentially reach 1.2450, which is an important level to focus on, as it is also extended by a 38.2% Fibonacci retracement mark. If candles close above the 1.2450 level, it may provide an opportunity to go long with targets at 1.2500 and 1.2540 levels.
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