- Investors positioned themselves ahead of the core PCE price index.
- Consumer confidence in the US has fallen due to fears about the economic outlook.
- Economists expect the core PCE price index to rise by 0.4%.
Wednesday’s GBP/USD forecast reveals a bearish outlook, boosted by a stronger dollar ahead of key inflation data. Investors positioned themselves ahead of the core PCE price index, which is closely watched by the Fed. On Tuesday, the dollar retreated slightly after the US released poor economic data.
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In particular, consumer confidence in the US has fallen amid fears about the economic outlook. Consumers were worried about the upcoming presidential election that could affect the economy. In addition, another report revealed a drop in orders for core durable goods. Business investment in equipment softened in January.
However, investors shrugged off this weakness on Wednesday as they awaited inflation data. Recent US inflation data came in higher than expected, showing persistence. So there is a good chance that this trend will continue. If so, the core PCE figure could be higher than the expected 0.4%. Consequently, investors would lower expectations for the Fed’s first rate cut in June. As a result, the dollar would rise, causing GBP/USD to fall.
Meanwhile, according to data from the US Commodity Futures Trading Commission, speculators trimmed their bullish positions in the pound as they await new catalysts in the market. At the same time, the volatility of the pound has fallen significantly in recent weeks. However, the currency remained largely stable.
GBP/USD key events today
GBP/USD Technical Forecast: Price is falling after reaching the ceiling of the channel
On the charts, GBP/USD bounces lower after hitting a resistance zone consisting of channel resistance and the critical 1.2700 level. The price is currently trading in a bullish channel. However, after touching channel resistance, the bears took a breakout below the 30-SMA.
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Notably, it made a solid bearish impulse before the price started trading in the channel. So there is a chance that the same thing will happen when it breaks out of its shallow channel. Currently, the price action is showing strong bearish momentum. Furthermore, the RSI is supporting bearish momentum below 50. Accordingly, the decline could continue past the channel support to retest the key support level of 1.2500.
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