GBP/USD Price Analysis and Trade Forecast: Daily Trading Signal
Daily Price Outlook
- Bullish Momentum: GBP/USD trades above its pivot at $1.3390, targeting resistance at $1.3427.
- Support Levels: Immediate support is seen at $1.3359; a break below could test $1.3334.
- Buy Strategy: Consider buying above $1.3390, targeting $1.3448 with a stop-loss at $1.3362.
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.
GBP/USD - Trade Ideas
Entry Price – Buy Above 1.33897
Take Profit – 1.34478
Stop Loss – 1.33621
Risk to Reward – 1: 2
Profit & Loss Per Standard Lot = +$581/ -$276
Profit & Loss Per Mini Lot = +$58/ -$27
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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GBP/USD Price Analysis – Sep 25, 2024
Daily Price Outlook
During the European trading session, the GBP/USD currency pair edged lower but held near the 1.3400 level as the US dollar continued to weaken, nearing its yearly low. This weakness is driven by expectations that the Federal Reserve might deliver one more significant interest rate cut before the end of the year.
Meanwhile, Investors believe the Bank of England (BoE) will gradually lower interest rates, as hinted by BoE Governor Andrew Bailey, who recently stated that interest rates are likely to decrease slowly.
Looking ahead, the focus will shift to the US core Personal Consumption Expenditures (PCE) data for August, set to be released on Friday. This is the Fed's key inflation measure, and economists expect core inflation to rise slightly to 2.7% from 2.6% in July.
US Dollar Weakens Amid Fed Rate Cut Expectations, Boosting GBP/USD
On the US front, the broad-based US Dollar is weakening, pushing the GBP/USD pair near its yearly high. The US Dollar Index (DXY), which measures the dollar’s value against six major currencies, is hovering around 100.20.
This decline comes as investors expect the Federal Reserve (Fed) to implement one more large interest rate cut in its remaining two policy meetings this year. The Fed recently cut interest rates by 50 basis points (bps), bringing them to a range of 4.75%–5.00%, in an effort to strengthen the labor market and return inflation to its 2% target.
According to the CME FedWatch tool, the Fed is expected to reduce interest rates by another 75 bps before the year ends, likely through one 50 bps cut and one 25 bps cut. The probability of a 50 bps rate cut in November has jumped to 59%, up from 37% a week ago.
Out of the 12 members of the Federal Open Market Committee (FOMC), only Fed Governor Michelle Bowman favored a more cautious approach with a smaller, 25 bps cut. These expectations are putting downward pressure on the US Dollar, benefiting the GBP/USD pair.
BoE's Gradual Rate Cuts and Inflation Concerns Boost GBP/USD
Another factor boosting the GBP/USD pair is the expectation that the Bank of England (BoE) will gradually lower interest rates. BoE Governor Andrew Bailey recently mentioned that the path for interest rates is likely to trend downward, but slowly.
He expressed confidence that inflation will return to the bank’s target of 2%, though he did not specify exactly where rates would settle. Bailey also assured that interest rates are unlikely to drop back to the historic lows seen during the pandemic.
In the UK, inflation has been close to the 2% target in recent months. However, high inflation in the services sector remains a concern for BoE policymakers. The Service Consumer Price Index (CPI), which is closely watched by the bank, increased from 5.2% in July to 5.6% in August.
This persistent rise in service sector prices is one reason the BoE is carefully managing rate cuts, ensuring that inflation across all sectors stabilizes before making significant changes.
GBP/USD - Technical Analysis
The GBP/USD pair is currently trading at $1.33989, down 0.11%, showing signs of consolidation following a modest decline in the previous session. The pair’s pivot point is set at $1.33831, indicating that a break above this level could signal renewed bullish momentum.
Immediate resistance is found at $1.34293, with further resistance levels at $1.34551 and $1.34885. A break above these levels could push the pair higher, signaling a potential short-term trend reversal.
On the downside, immediate support is seen at $1.33594, followed by key levels at $1.33310 and $1.32993. If prices fall below these levels, the GBP/USD pair could experience a deeper pullback, especially as market participants remain cautious ahead of key economic data releases.
Technical indicators show mixed sentiment. The Relative Strength Index (RSI) is currently at 53, indicating neutral momentum, though a dip below 50 would suggest increased bearish pressure. The 50-day Exponential Moving Average (EMA) is positioned at $1.33655, offering a critical support level for short-term trading.
Given the current technical setup, traders might consider entering long positions above $1.33831, with a take-profit target of $1.34280 and a stop-loss set at $1.33591.
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GBP/USD Price Analysis and Trade Forecast: Daily Trading Signal
Daily Price Outlook
- Immediate Resistance at $1.34293; breaking this level signals potential bullish momentum.
- Immediate Support at $1.33594; a breach may target $1.32993.
- RSI at 53 reflects neutral sentiment, with a slight bias toward consolidation.
The GBP/USD pair is currently trading at $1.33989, down 0.11%, showing signs of consolidation following a modest decline in the previous session. The pair’s pivot point is set at $1.33831, indicating that a break above this level could signal renewed bullish momentum.
Immediate resistance is found at $1.34293, with further resistance levels at $1.34551 and $1.34885. A break above these levels could push the pair higher, signaling a potential short-term trend reversal.
On the downside, immediate support is seen at $1.33594, followed by key levels at $1.33310 and $1.32993. If prices fall below these levels, the GBP/USD pair could experience a deeper pullback, especially as market participants remain cautious ahead of key economic data releases.
Technical indicators show mixed sentiment. The Relative Strength Index (RSI) is currently at 53, indicating neutral momentum, though a dip below 50 would suggest increased bearish pressure. The 50-day Exponential Moving Average (EMA) is positioned at $1.33655, offering a critical support level for short-term trading.
Given the current technical setup, traders might consider entering long positions above $1.33831, with a take-profit target of $1.34280 and a stop-loss set at $1.33591.
GBP/USD - Trade Ideas
Entry Price – Buy Above 1.33831
Take Profit – 1.34280
Stop Loss – 1.33591
Risk to Reward – 1: 1.8
Profit & Loss Per Standard Lot = +$449/ -$240
Profit & Loss Per Mini Lot = +$44/ -$24
GBP/USD Price Analysis and Trade Forecast: Daily Trading Signal
Daily Price Outlook
- GBP/USD faces immediate resistance at $1.3361, with a pivot point at $1.3419 critical for further gains.
- RSI at 66 suggests overbought conditions may be approaching, indicating potential for a pullback.
- The 50-day EMA at $1.3005 provides robust support, helping to maintain the bullish outlook.
The GBP/USD pair is currently trading at $1.33131, down by 0.05% as the pound faces modest pressure amidst a subdued market environment.
Despite the minor dip, the broader technical outlook remains cautiously optimistic, with the pair poised near key levels. The pivot point stands at $1.3419, a critical juncture that, if breached, could signal further upward movement.
Immediate resistance is situated at $1.3361, with additional hurdles at $1.3438 and $1.3507. Should the pair rally above these levels, a renewed bullish push could unfold.
However, on the downside, the first support lies at $1.3198. A move below this level could trigger a deeper correction, with further supports at $1.3114 and $1.3035. These levels will be crucial in determining whether the pound can maintain its overall uptrend or if bearish momentum takes control.
Technically, the RSI is hovering at 66, suggesting that the pair is approaching overbought conditions, signaling caution for traders eyeing further gains.
Meanwhile, the 50-day Exponential Moving Average (EMA) sits at $1.3005, continuing to provide a solid foundation for the pair’s upward trajectory. As long as the price remains above this level, the broader trend remains supportive of the bulls.
In conclusion, a buy-above strategy remains attractive, with an entry price at $1.32643 and a profit target at the pivot level of $1.34194.
Traders should consider placing a stop-loss at $1.31995 to protect against downside risks, particularly if the pair fails to break above its immediate resistance.
GBP/USD - Trade Ideas
Entry Price – Buy Above 1.32643
Take Profit – 1.34194
Stop Loss – 1.31995
Risk to Reward – 1: 2.3
Profit & Loss Per Standard Lot = +$1551/ -$648
Profit & Loss Per Mini Lot = +$155/ -$64
GBP/USD Price Analysis – Sep 23, 2024
Daily Price Outlook
During the early European trading session, the GBP/USD currency pair continued its three-day losing streak, dropping to 1.3266 on Monday. This decline comes as the US Dollar sees a modest recovery, putting additional pressure on the major pair.
The Bank of England's cautious approach to interest rates, combined with steady inflation, adds to the uncertainty surrounding the pound, as traders look for clearer signals on monetary policy.
Looking ahead, all eyes will be on the flash reading of the US Purchasing Managers Index (PMI) scheduled for release later today.
A stronger-than-expected PMI could bolster the US dollar further, leading to additional selling pressure on the GBP/USD pair.
US Dollar Faces Pressure Amid Fed Rate Cut and Economic Uncertainty
Despite the rising expectations of a Fed rate cut, the broad-based US dollar has regained mild positive traction ahead of the flash reading of the US Purchasing Managers Index (PMI). Last week, the US Federal Reserve lowered its key overnight borrowing rate by half a percentage point, marking its first cut since the early days of the Covid pandemic.
The Fed's statement expressed greater confidence that inflation is moving toward its 2% target, with risks to employment and inflation goals now seen as roughly balanced.
However, Fed Chair Jerome Powell was careful not to claim victory over inflation, as pricing pressures still persist.
Looking ahead, the US Personal Consumption Expenditures (PCE) index, which is the Fed's preferred measure of inflation, is set to be released on Friday. This report may provide insights into inflation trends and the future of US interest rates.
Meanwhile, uncertainty about the US economic outlook, coupled with rising expectations of further Fed rate cuts later this year, is likely to keep pressure on the US dollar, particularly against the Pound Sterling (GBP).
Bank of England's Cautious Stance Bolsters GBP Against USD
On the other hand, Bank of England (BoE) Governor Andrew Bailey emphasized the importance of keeping inflation low. He stated that it’s crucial not to reduce interest rates too quickly or by too much to maintain stability.
In their latest monetary policy meeting, the BoE decided to hold interest rates steady at 5.0%. This decision came right after the UK reported its Consumer Price Index (CPI) inflation data, which remained unchanged at 2.2% year-over-year in August.
Bailey's cautious approach reflects the ongoing challenges in managing inflation and economic growth. By keeping interest rates steady, the BoE aims to balance the need for economic support while preventing inflation from rising.
As inflation data shows signs of stability, the central bank is carefully considering its next steps. Market participants will be watching closely for any signals from the BoE regarding future interest rate decisions, as these choices will play a significant role in shaping the UK’s economic outlook.
Therefore, the Bank of England's decision to hold rates steady and focus on inflation stability may strengthen the GBP against the USD. As market participants anticipate cautious monetary policy, the GBP/USD pair could see upward pressure if inflation remains controlled.
GBP/USD - Technical Analysis
The GBP/USD pair is currently trading at $1.33131, down by 0.05% as the pound faces modest pressure amidst a subdued market environment. Despite the minor dip, the broader technical outlook remains cautiously optimistic, with the pair poised near key levels.
The pivot point stands at $1.3419, a critical juncture that, if breached, could signal further upward movement. Immediate resistance is situated at $1.3361, with additional hurdles at $1.3438 and $1.3507. Should the pair rally above these levels, a renewed bullish push could unfold.
However, on the downside, the first support lies at $1.3198. A move below this level could trigger a deeper correction, with further supports at $1.3114 and $1.3035. These levels will be crucial in determining whether the pound can maintain its overall uptrend or if bearish momentum takes control.
Technically, the RSI is hovering at 66, suggesting that the pair is approaching overbought conditions, signaling caution for traders eyeing further gains.
Meanwhile, the 50-day Exponential Moving Average (EMA) sits at $1.3005, continuing to provide a solid foundation for the pair’s upward trajectory. As long as the price remains above this level, the broader trend remains supportive of the bulls.
In conclusion, a buy-above strategy remains attractive, with an entry price at $1.32643 and a profit target at the pivot level of $1.34194. Traders should consider placing a stop-loss at $1.31995 to protect against downside risks, particularly if the pair fails to break above its immediate resistance.
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GBP/USD Price Analysis and Trade Forecast: Daily Trading Signal
Daily Price Outlook
- Immediate resistance at $1.3227, with support at $1.3113, marks key levels to watch.
- RSI at 57 signals mildly bullish momentum with further upside potential.
- 50-day EMA at $1.3125 supports the current short-term uptrend, favoring a bullish bias.
GBP/USD is currently trading at $1.31912, up 0.24%, showing signs of steady momentum. The pair is inching closer to its key pivot point at $1.3226, which marks an important inflection level.
Immediate resistance is just above at $1.3227, followed by additional resistance levels at $1.3265 and $1.3306. On the downside, support levels are found at $1.3113, with further support at $1.3060 and $1.3003.
The RSI stands at 57, indicating mildly bullish sentiment, with room for further gains if the upward momentum continues.
The price is currently hovering above the 50-day EMA, which is positioned at $1.3125, suggesting that the short-term trend is supported by technical factors.
As long as the pair maintains levels above the $1.3125 EMA, a bullish continuation could unfold, potentially breaking above the $1.3227 resistance.
Traders are keeping an eye on macroeconomic events, including the upcoming Bank of England meeting, which could create additional volatility. For now, the pair shows a potential buying opportunity above $1.31706, with a take profit at $1.32259 and a stop-loss at $1.31415.
Should the price break below the $1.3113 support level, it could signal a shift towards a more bearish outlook.
Overall, the pair is poised between critical support and resistance levels, making the $1.3226 pivot a key determinant for the next market move.
GBP/USD - Trade Ideas
Entry Price – Buy Above 1.31706
Take Profit – 1.32259
Stop Loss – 1.31415
Risk to Reward – 1: 1.9
Profit & Loss Per Standard Lot = +$553/ -$291
Profit & Loss Per Mini Lot = +$55/ -$29
GBP/USD Price Analysis – Sep 18, 2024
Daily Price Outlook
During the European trading session, the GBP/USD pair continued its upward momentum, climbing near 1.3220 level. This surge followed the release of hotter-than-expected UK inflation data for August.
Meanwhile, the US Dollar is losing ground, weighed down by a dovish stance from the Federal Reserve, which further boosted the GBP/USD.
Looking ahead, investors are focused on the Bank of England’s (BoE) policy decision on Thursday. Before the recent inflation data, markets expected the BoE to keep interest rates unchanged at 5%.
However, with inflation still high, many now believe rates could stay at this level for the rest of the year.
Fed's Expected Rate Cut and Policy Shift May Heighten GBP/USD Volatility
On the US front, the Fed is widely expected to announce its first interest rate cut in over four years. According to the CME FedWatch tool, there's a 65% chance the Fed will lower rates by 50 basis points to 4.75%-5.00%, with the remaining probability favoring a smaller 25-bps cut.
The main focus now is on how fast the Fed will continue reducing rates, as officials have signaled growing concern over weakening labor demand rather than inflation.
In addition to the rate decision, investors will pay close attention to the Fed’s dot plot, which shows the long-term interest rate expectations from policymakers, and the updated economic projections.
Fed Chair Jerome Powell’s press conference following the announcement will also be crucial for understanding the central bank’s future policy path. Recent comments from Fed officials suggest that they are now more focused on weakening labor demand than on inflation.
This hints at a shift toward a more balanced policy approach as they look to normalize rates.
This news is likely to increase volatility in the GBP/USD pair. A Fed rate cut could weaken the US dollar, potentially pushing GBP/USD higher, but uncertainty around the pace of cuts and labor market concerns may keep movements unpredictable.
UK Inflation Surge Fuels Uncertainty Around BoE Rate Cuts, Boosting GBP/USD
Another factor boosting the GBP/USD pair is the hotter-than-expected UK inflation data for August. The Office for National Statistics (ONS) reported that core inflation, which excludes items like food and energy, rose by 3.6%, higher than the expected 3.5%, and up from 3.3% in July.
Additionally, services inflation, closely monitored by the Bank of England (BoE), increased sharply to 5.6% from 5.2% in July. This rise in inflation could make traders rethink their expectations of another interest rate cut from the BoE this year.
GBP/USD - Technical Analysis
GBP/USD is currently trading at $1.31912, up 0.24%, showing signs of steady momentum. The pair is inching closer to its key pivot point at $1.3226, which marks an important inflection level.
Immediate resistance is just above at $1.3227, followed by additional resistance levels at $1.3265 and $1.3306. On the downside, support levels are found at $1.3113, with further support at $1.3060 and $1.3003.
The RSI stands at 57, indicating mildly bullish sentiment, with room for further gains if the upward momentum continues.
The price is currently hovering above the 50-day EMA, which is positioned at $1.3125, suggesting that the short-term trend is supported by technical factors.
As long as the pair maintains levels above the $1.3125 EMA, a bullish continuation could unfold, potentially breaking above the $1.3227 resistance.
Traders are keeping an eye on macroeconomic events, including the upcoming Bank of England meeting, which could create additional volatility. For now, the pair shows a potential buying opportunity above $1.31706, with a take profit at $1.32259 and a stop-loss at $1.31415.
Should the price break below the $1.3113 support level, it could signal a shift towards a more bearish outlook.
Overall, the pair is poised between critical support and resistance levels, making the $1.3226 pivot a key determinant for the next market move.
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GBP/USD Price Analysis and Trade Forecast: Daily Trading Signal
Daily Price Outlook
- GBP/USD faces immediate resistance at $1.3209, with RSI nearing overbought levels, signaling caution.
- Immediate support is found at $1.3102, with the 50-day EMA at $1.3094 acting as critical support.
- As long as GBP/USD stays above the pivot point at $1.3158, the bullish outlook remains intact, targeting $1.3209 and above.
GBP/USD is trading at $1.31716, up 0.24%, maintaining a bullish tone as it approaches key resistance levels. Immediate resistance is found at $1.3209, followed by $1.3238 and $1.3260.
The bullish sentiment remains intact as the price stays above the pivot point of $1.3158, signaling potential for further gains.
However, the Relative Strength Index (RSI) is currently at 67, approaching overbought territory, suggesting a possible near-term pullback.
On the downside, immediate support lies at $1.3102, followed by $1.3077 and $1.3051. The 50-day EMA at $1.3094 is providing crucial support, reinforcing the broader bullish momentum. A break below this level could indicate a reversal, but as long as the price holds above $1.3158, traders may remain optimistic about further gains.
The overall outlook for GBP/USD stays positive, with buyers looking for an entry point above $1.31585. Targeting take-profit levels near $1.32059, traders may expect the pair to test higher resistance levels. However, with the RSI nearing overbought conditions, caution is warranted as profit-taking could emerge, potentially sending the pair back to test support levels.
GBP/USD - Trade Ideas
Entry Price – Buy Above 1.31585
Take Profit – 1.32059
Stop Loss – 1.31245
Risk to Reward – 1: 1.4
Profit & Loss Per Standard Lot = +$474/ -$340
Profit & Loss Per Mini Lot = +$47/ -$34
GBP/USD Price Analysis – Sep 16, 2024
Daily Price Outlook
During Monday's European session, the GBP/USD pair continued its strong upward movement, climbing to around 1.3180 and peaking at 1.3195.
This rise was mainly fueled by the belief that the Bank of England (BoE) will approach policy changes more cautiously compared to the Federal Reserve (Fed).
Meanwhile, the USD Index (DXY), which measures the Greenback against a basket of major currencies, remains close to its year-to-date low from August.
Traders are speculating on a substantial rate cut by the Fed later this week, possibly reducing borrowing costs by 50 basis points. This expectation comes in response to recent data showing a slowdown in US inflation.
As a result, US Treasury bond yields are hovering near their 2024 lows, putting additional pressure on the USD. In the meantime, the overall positive market sentiment is also diminishing the Greenback's appeal as a safe-haven asset.
US Dollar Weakness and Fed Rate Cut Expectations Boost GBP/USD
On the US front, the broad-based US dollar, tracked by the USD Index (DXY), is struggling near its lowest point of the year, set in August. This decline comes amid expectations that the Federal Reserve (Fed) will ease its monetary policy more aggressively.
Traders are now betting that the Fed will cut interest rates by 50 basis points (bps) later this week, up from 30% a week ago to 61% according to the CME FedWatch tool.
This shift is driven by recent data showing a slowdown in US inflation, with the Producer Price Index (PPI) for August revealing a faster-than-expected drop in producer prices to 1.7%.
The US dollar's decline and expectations of a significant Fed rate cut have bolstered the GBP/USD pair, as investors anticipate that the Bank of England will be less aggressive in easing policies compared to the Fed, strengthening the British Pound.
Impact of Bank of England and UK Economic Data on GBP/USD
On the other hand, the British Pound (GBP) is benefiting from the expectation that the Bank of England (BoE) will ease its policies less aggressively than the Federal Reserve (Fed) in the coming year.
This helps boost the GBP as the Fed is expected to cut rates more sharply. However, there are still concerns in the market about the BoE's actions.
Recent data showed a slowdown in UK wage growth and flat GDP for two consecutive months in July, leading to some uncertainty about the GBP's future strength.
Despite the positive sentiment around the GBP, these economic indicators might temper enthusiasm among investors.
They could be cautious about making strong bets on the GBP/USD pair due to these signs of economic weakness.
As a result, while the GBP gains from expectations of less aggressive BoE policy easing, the recent UK data might make traders hesitant to take bold positions in the GBP/USD currency pair.
Therefore, the GBP/USD pair benefits from expectations of a less aggressive BoE policy easing compared to the Fed.
However, concerns over recent UK economic data, including slow wage growth and flat GDP, may temper investor enthusiasm and limit GBP gains.
GBP/USD - Technical Analysis
GBP/USD is trading at $1.31716, up 0.24%, maintaining a bullish tone as it approaches key resistance levels. Immediate resistance is found at $1.3209, followed by $1.3238 and $1.3260.
The bullish sentiment remains intact as the price stays above the pivot point of $1.3158, signaling potential for further gains.
However, the Relative Strength Index (RSI) is currently at 67, approaching overbought territory, suggesting a possible near-term pullback.
On the downside, immediate support lies at $1.3102, followed by $1.3077 and $1.3051. The 50-day EMA at $1.3094 is providing crucial support, reinforcing the broader bullish momentum.
A break below this level could indicate a reversal, but as long as the price holds above $1.3158, traders may remain optimistic about further gains.
The overall outlook for GBP/USD stays positive, with buyers looking for an entry point above $1.31585. Targeting take-profit levels near $1.32059, traders may expect the pair to test higher resistance levels.
However, with the RSI nearing overbought conditions, caution is warranted as profit-taking could emerge, potentially sending the pair back to test support levels.
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