GBP/USD Price Analysis – May 08, 2024
Daily Price Outlook
During the European trading session, the GBP/USD currency pair continued its downward trend, trading near the 1.2490 level and reaching an intra-day low of 1.2468. This decline is primarily driven by a strengthening US Dollar and growing uncertainty surrounding the Bank of England's (BoE) upcoming interest rate decision. Moving ahead, traders seem hesitant to take strong positions ahead of speeches from Fed policymakers.
Fed's Hawkish Signals Propel US Dollar, Weighing on GBP/USD
On the US front, the broad-based US dollar has been gaining momentum, driven by a more hawkish stance on interest rates from some Federal Reserve (Fed) policymakers. This rebound in the Dollar has put downward pressure on the GBP/USD pair. Minneapolis Fed Bank President Neel Kashkari recently suggested that US interest rates might remain steady throughout the year, strengthening the dollar. These comments indicate worries about the sluggish pace of reducing inflation and the ongoing strength of the housing market.
Therefore, the Fed's hawkish stance contrasts with the BoE's more cautious approach, contributing to the downward trend in the GBP/USD pair. With limited major US economic data releases this week, speeches from Fed policymakers will continue to drive market sentiment, likely supporting the US Dollar in the near term.
BoE's Expected Rate Hold and Dovish Outlook Weaken Pound Sterling
On the UK front, the BoE is expected to keep its benchmark interest rate at 5.25% in its upcoming meeting, marking the sixth consecutive time it has held rates steady. However, speculation is rising that the BoE could lean toward a more dovish outlook, especially following Governor Andrew Bailey's recent remarks indicating that headline inflation might have returned to the target rate of 2% in April.
Thus, the anticipated decision by the BoE to maintain rates unchanged, coupled with the potential for rate cuts later in the year, has fueled the bearish sentiment in the GBP/USD pair. Financial markets are factoring in 53 basis points of rate cuts for the year, suggesting at least two quarter-point reductions, following previous indications from BoE policymakers regarding a slowdown in inflation.
GBP/USD - Technical Analysis
Today's technical outlook for the GBP/USD pair shows a modest downturn, as it trades down 0.14% at $1.24895. The currency pair's movement is framed by a series of pivotal technical levels that could dictate the short-term direction.
Currently, the pair's pivot point is set at $1.2529, a key level that traders might use as a benchmark for bullish or bearish bias.
The immediate resistance facing GBP/USD lies at $1.2635, with subsequent barriers at $1.2706 and $1.2793. Overcoming these levels could signal a stronger bullish sentiment, inviting more buyers into the market.
On the flip side, immediate support is established at $1.2467, with further floors at $1.2387 and $1.2301. These levels could provide critical stopping points where potential rebounds may occur if bearish pressure persists.
The Relative Strength Index (RSI) currently stands at 39, suggesting a tilt towards oversold conditions that might entice bargain hunters. The 50-day Exponential Moving Average (EMA), aligned with the pivot at $1.2529, adds an extra layer of significance to this price point, reinforcing it as a crucial threshold.
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