GBP/USD Price Analysis – Aug 12, 2024
Daily Price Outlook
During the European trading session, the GBP/USD currency pair struggled to maintain its upward momentum, trading around 1.2761 and reaching an intra-day high of 1.2782.
This rally was supported by steady market sentiment, which bolstered the GBP. Additionally, expectations of a 25 basis point interest rate cut by the Federal Reserve in September contributed to the GBP's strength against the USD.
Investors are closely watching upcoming UK employment data for June and the Consumer Price Index (CPI) for July, scheduled for release on Tuesday and Wednesday, respectively, which further influenced the GBP's performance.
GBP/USD Volatility Expected Amidst BoE Rate Cut Speculations and Inflation Concerns
On the BoE front, the Pound Sterling gained traction against most major currencies during Monday’s European session.
Investors are keenly awaiting the UK Employment data for June and the Consumer Price Index (CPI) for July, set to be released on Tuesday and Wednesday.
The UK Employment report is expected to show a slight rise in the ILO Unemployment Rate to 4.5% from 4.4%.
Average Earnings Excluding Bonuses, a key indicator of wage growth, is forecasted to slow significantly to 4.6% from 5.7%.
However, the decline in wage growth could lead to expectations of interest rate cuts by the Bank of England (BoE).
Despite this, BoE MPC member Catherine Mann expressed concern about rising goods and services prices and persistent wage pressures, indicating that inflation risks may remain, even with annual headline inflation at the bank’s 2% target.
Therefore, the GBP/USD pair may experience volatility as investors react to potential rate cuts from the BoE and ongoing inflation concerns, balancing expectations against the latest employment and wage data.
Impact of Federal Reserve Rate Cut Expectations and CPI Data on GBP/USD
On the US front, traders are increasingly betting on a Federal Reserve (Fed) rate cut at the next meeting, which could be positive for the GBP/USD pair.
Lower interest rates often lead to a weaker US dollar, making the GBP/USD pair more attractive.
According to the CME FedWatch Tool, there is a nearly even chance of a rate cut, with a 49.5% probability of a 0.25% cut and a 50.5% probability of a 0.50% cut in September. This anticipation is contributing to increased interest in the GBP/USD pair.
On the data front, the Consumer Price Index (CPI) for July, scheduled for release on Wednesday, is expected to show a 0.2% increase for both headline and core inflation, following a 0.1% decline in headline CPI in June.
Meanwhile, the Producer Price Index (PPI), set for release on Tuesday, is forecast to rise by 0.1% in July, after a 0.2% gain in June.
If the CPI comes in higher than expected, it could raise concerns about the Fed's plans for aggressive rate cuts, potentially exerting downward pressure on Gold prices.
If CPI exceeds expectations, concerns about the Fed's rate cut plans could boost the US dollar, potentially weakening the GBP/USD pair. Conversely, a rate cut would likely strengthen GBP/USD.
GBP/USD - Technical Analysis
The British pound is trading around $1.27628, experiencing a modest decline of 0.03% in the current session.
On the 4-hour chart, GBP/USD is hovering just below the pivot point at $1.2801, indicating a cautious market sentiment.
The immediate resistance is positioned at $1.2802, a level that, if breached, could lead the pair to test higher resistance levels at $1.2839 and $1.2889.
However, the pound remains under pressure, with immediate support seen at $1.2708. Should this support fail to hold, the next downside targets are at $1.2672 and $1.2633.
The 50-day Exponential Moving Average (EMA) is slightly below the current price, positioned at $1.2759, suggesting that the pair may find support around this level.
The Relative Strength Index (RSI) is currently at 54, indicating a neutral to mildly bullish outlook.
This RSI reading implies that the market is neither overbought nor oversold, providing room for potential upward movement if positive momentum gains traction.
Given the current technical setup, a buy limit order at $1.27486 could be strategically advantageous, with a take-profit target at $1.28008.
A stop-loss order should be placed at $1.27173 to mitigate risk in the event of further downside movement.
The key focus for traders will be on whether the pound can reclaim the pivot point at $1.2801, which could open the door for a more substantial rally.
Related News
EUR/USD Price Analysis – Aug 12, 2024
JOIN LONGHORNFX TODAY
24/7 live support, lightning fast withdrawals, guaranteed safe and reliable trading platforms with a true ECN broker.