GBP/USD Price Analysis – Sep 05, 2024
Daily Price Outlook
During the European trading session, the GBP/USD currency pair maintained its upward trend and performed strongly around 1.3168, reaching an intra-day high of 1.3172.
The British pound strengthened as the positive UK economic outlook boosted market expectations that the Bank of England's (BoE) policy-easing cycle might be shallower this year compared to other central banks.
Meanwhile, the US dollar weakened due to weaker-than-expected U.S. job data, which increased the likelihood of a significant interest rate cut by the Federal Reserve. This also supported the GBP/USD pair.
Looking ahead, traders are being careful as they wait for the important US Nonfarm Payrolls (NFP) report on Friday. Before that, they'll also pay attention to Thursday's US economic updates, including job reports from the ADP, Weekly Jobless Claims, and the ISM Services PMI.
GBP/USD Strengthens on Positive UK Economic Outlook and Fewer BoE Rate Cut Expectations
On the BoE front, the British Pound is gaining strength as the positive UK economic outlook suggests that the Bank of England’s (BoE) interest rate cuts may be less aggressive compared to other central banks.
The latest S&P Global/CIPS PMI data shows the UK economy grew at a faster pace in August, with both the manufacturing and services sectors expanding significantly. This marks the strongest growth since April, raising hopes for a more stable economic environment.
Financial markets now expect the BoE to cut interest rates just once this year. The central bank, which began shifting to a more neutral policy in August, is expected to keep rates steady at 5% this month, with a possible cut in November or December.
Meanwhile, the Pound's value will be influenced by market sentiment and speculation on rate cuts, especially as key UK economic reports are absent. Next week, investors will turn their attention to employment data for July and monthly GDP figures.
This news has boosted the GBP/USD pair, as expectations of fewer BoE rate cuts support the British Pound. Strong UK economic data strengthens the Pound, while market sentiment and upcoming employment and GDP reports could drive further movement.
GBP/USD Rises as Weak US Job Data Fuels Fed Rate Cut Expectations
On the US front, the broad-based US Dollar (USD) weakened as weak Job Openings data for July put pressure on the currency. The latest report showed that US job vacancies fell to 7.67 million, the lowest in over three-and-a-half years.
This signals a slowing job market, raising expectations that the Federal Reserve (Fed) may start cutting interest rates more aggressively. Market speculation now suggests a 41% chance that the Fed could reduce rates by 50 basis points in its September meeting, up from 34% a week ago.
Looking ahead, the US Nonfarm Payrolls (NFP) report for August, due on Friday, will be a key event that could impact the USD. In Thursday’s North American session, important data like the ADP Employment Change, ISM Services PMI, and Initial Jobless Claims will be in focus.
Therefore, this news has strengthened the GBP/USD pair, with the Pound rising above 1.3150 as the weaker US Dollar faces pressure from soft US job data. Increased expectations of Fed rate cuts further support the Pound's gains against the Dollar.
GBP/USD - Technical Analysis
The British Pound is facing downside pressure against the U.S. Dollar as it struggles below the key resistance level of $1.31673, which is reinforced by the 50-day Exponential Moving Average (EMA). GBP/USD has formed a lower high at $1.31880, signaling potential weakness.
The immediate support at $1.30891 is being closely watched, as a break below this level could trigger further downside towards $1.30523. The pair is currently in a consolidation phase, with the RSI at 45.15, which indicates there’s room for the price to slide lower before reaching oversold territory.
The descending trendline from previous highs continues to act as resistance near $1.31673, and any failure to break above this could attract sellers. A confirmed bearish break below $1.30891 might lead to a retest of the psychological level at $1.30111. Meanwhile, bulls should be cautious as any upside movement remains capped by resistance near the $1.31880 zone.
The pair remains bearish below the pivot point at $1.31517, with a possible downside target at $1.30891. A failure to hold above $1.31517 suggests potential weakness in the short term.
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