GBP/USD Price Forecast: BoE expectations and the US GDP report are in focus. The technical analysis included.
- The British pound is seeking a respite amidst a weaker dollar today.
- The focal points for the day are the US GDP report and remarks from the Federal Reserve.
- GBP/USD finds support at the 1.21 level.
GBP/USD Price Forecast
Despite a modest pullback this morning, the British pound remains vulnerable as the US dollar (DXY) experiences marginal weakness. Neel Kashkari, known for his hawkish monetary policy stance, has continued to advocate for another interest rate hike by the Federal Reserve during appearances on CNN and Fox Business.
From the Bank of England (BoE) perspective, money markets have adjusted expectations for 2024, signaling fewer rate cuts by December 2024, with a projection of 25 basis points. The narrow vote split between those favoring a hike and those favoring a pause may have exaggerated the market’s reaction to the recent BoE decision, leaving room for future rate hikes. Currently, peak rate estimates are similar for the Federal Reserve and the BoE. Still, this balance could shift in favor of the pound if the US exhibits signs of economic weakness while the UK’s financial data shows resilience.
Bank of England Interest Rate Probabilities
Today’s economic calendar primarily focuses on US-specific factors, including the US GDP report and additional commentary from Federal Reserve officials. While we expect marginal improvement in GDP, recent strength in metrics like initial jobless claims is crucial. The release of the Core PCE index is significant from an inflation standpoint, and a lower-than-expected forecast could exert downward pressure on the dollar. Upcoming remarks from Federal Reserve Chair Jerome Powell and other officials may provide insights into whether the hawkish stance presented by Neel Kashkari will be sustained or tempered.
Analyzing the daily cable chart, it’s evident that bulls are defending the psychological 1.2100 level, with the pair trading in an oversold condition, as indicated by the Relative Strength Index (RSI). While there may be a potential turnaround, this could be short-lived, as the fundamentals currently favor the US dollar.
Key Resistance Levels
200-day moving average
Key Support Levels
Bullish IG Client Sentiment (GBP/USD)
IG Client Sentiment Data (IGCS) reveals that retail traders currently hold net long positions on GBP/USD, with 71% of traders maintaining long positions (as of this report).