GBP/USD Price Analysis – Sep 30, 2024
Daily Price Outlook
During the European trading session, the GBP/USD currency pair maintained its upward momentum, climbing to approximately 1.3394 and reaching an intraday high of 1.3423. This surge coincided with a weakening US dollar, which fell to near-yearly lows.
The dollar's decline was driven by data released on Friday, revealing a further slowdown in US inflation for August.
Meanwhile, the British Pound showed strength against major currencies as the week began. Investor optimism is growing, fueled by expectations that the Bank of England (BoE) will implement interest rate cuts at a slower pace and to a lesser extent compared to other G-7 central banks.
This positive outlook is boosting confidence in the Pound and enhancing its strength in the currency market.
Weaker US Dollar and Rate Cut Expectations Fuel GBP/USD Surge
On the US front, the broad-based US dollar has fallen to near yearly lows, propelling the GBP/USD pair higher. This decline follows data released on Friday indicating a further slowdown in US inflation for August, leading to increased expectations for interest rate cuts.
However, the market remains skeptical about a substantial 50 basis points (bps) cut, as the Federal Reserve is adopting a more cautious stance regarding potential risks in the labor market and a slowing economy.
This week, investors will closely monitor several key economic reports from the US, including the ISM Manufacturing and Services PMIs, ADP Employment figures, and September's Nonfarm Payrolls (NFP) data, as well as August's JOLTS Job Openings data.
These reports will provide valuable insights into the current job market and overall economic conditions.
Apart from this, Federal Reserve Chair Jerome Powell is scheduled to speak. His remarks could offer new guidance on interest rates, indicating whether the Fed is considering another significant cut of 50 basis points, similar to the September 18 decision, or a more measured reduction of 25 basis points.
Consequently, the weakening US dollar and increasing expectations for interest rate cuts are likely to bolster the GBP/USD pair.
However, the positive economic data from the UK and cautious comments from the Fed could further support the Pound's strength against the dollar.
Pound Sterling Strength Supported by BoE Rate Cut Expectations Amid Slower GDP Growth
On the other hand, the Pound Sterling is starting the week on a strong note against major currencies. Investors are feeling optimistic that the Bank of England (BoE) will be more measured in its approach to interest rate cuts compared to other G-7 central banks.
Many believe there’s likely to be one more cut of 25 basis points (bps) in one of the BoE’s upcoming meetings this year.
On the economic front, revised estimates for the UK's Q2 Gross Domestic Product (GDP) indicate that the economy grew by 0.5%, which is slower than the initial estimate of 0.6% quarterly.
Besides, the annual GDP growth for Q2 has also been revised down to 0.7%, compared to the preliminary estimate of 0.9%.
These figures suggest that while the UK economy is growing, the pace is slower than previously thought, which may impact future monetary policy decisions by the BoE.
Hence, the Pound Sterling's strength against major currencies, driven by expectations of slower interest rate cuts from the BoE, could support the GBP/USD pair. However, slower-than-expected GDP growth may temper gains, leading to cautious sentiment among investors in the currency market.
GBP/USD - Technical Analysis
GBP/USD is trading at $1.34054, up 0.15% for the day, indicating a mild bullish bias as it trades above its pivot point at $1.3390. The pair has been gaining traction, supported by positive UK economic data, and is now eyeing key resistance levels.
Immediate resistance is seen at $1.3427, followed by $1.3456 and $1.3487. A break above $1.3427 could pave the way for further gains, potentially targeting $1.3456 in the near term.
On the downside, immediate support lies at $1.3359, with subsequent support levels at $1.3334 and $1.3312.
The 50-day Exponential Moving Average (EMA) at $1.3390 serves as a key short-term support level, and any sustained move below this point could shift the sentiment back to bearish.
Additionally, the Relative Strength Index (RSI) is currently at 58, indicating that the pair is not overbought, leaving room for potential further upside before reaching overextended levels.
Traders looking to capitalize on the current momentum might consider entering long positions above $1.3390, targeting $1.3448 with a stop-loss set around $1.3362 to limit downside risk.
The GBP/USD outlook will remain dependent on upcoming economic data releases from both the UK and the U.S., with particular focus on U.S. jobs data and any potential shifts in Federal Reserve policy.
In summary, GBP/USD is trading with a slight bullish bias, holding above its pivot point. A break above $1.3427 could further strengthen the pair’s upward momentum. However, any move below $1.3359 would negate this bias and possibly lead to a retest of lower support levels.
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