GBP/USD Price Analysis – July 07, 2023

Daily Price Outlook

The British Pound is trading at 1.2740 decreasing by 0.02 percent on Friday. The monthly payrolls report still to come, heightened the possibility of higher Federal Reserve interest rates for a longer period, the U.S. dollar declined in early European hours on Friday but is still on track for modest gains this week.

JPMorgan thinks interest rates might reach 7% and foresees a "hard landing" in the UK.

According to JP Morgan, the dangers of an economic hard landing are also increasing, and the Bank of England may raise interest rates to 7% to control inflation.

Since borrowing costs are frequently connected with the primary interest rate set by the central bank, the study by JP Morgan economist Allan Monks comes as U.K. households see a dramatic spike in borrowing rates.

Looking ahead, a variety of variables, according to JPMorgan's Monks, might lead the central bank to raise rates more than anticipated.

As psychology changes and a persistent wage-price spiral takes hold, "high inflation might lead to a larger rise in inflation expectations. Elevated short-term expectations may potentially result in a more chronic issue, even if longer-term measures stay grounded, he noted.

To guarantee real rates, turn sufficiently positive to disrupt this dynamic, the BOE may be forced to raise rates above our prediction. These comments from JP Morgan analyst added pressure on British Pound.

The Upcoming US Non-Farm Payroll data is keeping Market steady

On US front, ADP private payrolls increased significantly in June, marking the greatest increase since February 2022, according to data released on Thursday. Last week saw a modest increase in the number of Americans submitting new unemployment benefit claims.

These data releases show a labor market that is durable and has withstood an aggressive tightening cycle that lasted a full year, indicating that the Federal Reserve can keep raising interest rates to completely control rising prices.

Now, attention will shift to the much-anticipated monthly nonfarm payrolls report, which might provide more hints about the Fed officials' plans for later this month.

This should display nonfarm payrolls. After growing by 339,000 in May and by 294,000 in April, nonfarm payrolls in the United States expanded by 225,000 jobs last month.

Traders are awaiting its release and are cautious ahead of it, causing little to no movement in the market.

GBP/USD Price Chart – Source: Tradingvie

GBP/USD - Technical analysis

Yesterday, the GBP/USD pair displayed a mix of trading patterns, initially rising strongly to reach the 1.2780 level, but quickly retracing downwards to test the 1.2675 areas.

It is worth noting that the price currently holds above the crucial support level at 1.2720, indicating an attempt to regain the main bullish trend.

However, the price is currently confined within a rising wedge pattern, which could potentially lead to a correctional bearish movement.

Given the conflicting technical factors, we maintain a neutral stance until we receive clearer signals for the next trend.

Breaking below 1.2720 would likely push the price towards the next correctional station at 1.2640, while surpassing 1.2760 would be key to achieving new gains, potentially targeting the 1.2850 areas.

For today's trading, we anticipate the price to move within a range of support at 1.2640 and resistance at 1.2820.

Overall, the expected trend for today is neutral, considering the current market conditions.