- US jobless claims rose last week to the highest level in two months.
- The dollar rallied as Fed policymakers delivered sharp remarks on Thursday.
- Markets expect a decline in employment in the US.
GBP/USD’s current price analysis leans bearish, driven by a rally in the dollar amid diminishing expectations of a Fed rate cut. Moreover, the dollar is steady ahead of the key US monthly jobs report.
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The dollar has fluctuated strongly over the past week as investors adjust their expectations for a Fed rate cut. Initially, weak data on services activity and jobless claims led investors to gain confidence that the Fed would cut rates starting in June. Consequently, the GBP/USD pair strengthened to new highs.
However, the trend reversed when Fed policymakers made hawkish remarks later on Thursday. Some officials have lost confidence that inflation will soon reach the 2% target as it has stalled. As such, they urged patience as the Fed needs more time to assess incoming data.
Moreover, if inflation remains hot, there may not be a need for a rate cut this year. The remarks prompted traders to reduce their bets on a rate cut, with most now expecting the first cut in July. However, the outlook for a rate cut could change again when the non-farm payrolls report is released. Markets expect a decline in employment. A larger-than-expected decline could force policymakers to reconsider their recent statements.
Meanwhile, data showed that the UK economy gradually emerged from a shallow recession. Composite data showed a slight decline in activity, although it held above 50 in expansion. If the economic outlook improves, this could allow the BoE to keep rates on hold for longer as inflation trends lower.
GBP/USD key events today
- Average hourly earnings in the US
- Employment change in the US
- Unemployment rate in the US
GBP/USD Price Technical Analysis: Price Breaks Resistance Trendline, Accepts Bullish Trend
On the charts, the GBP/USD price has broken above a strong resistance trend line, reversing the trend to a bullish one. Price made a large bullish candle that broke above the 30-SMA, indicating a change in sentiment. Meanwhile, the RSI finally broke above 50, a strong resistance that separates bearish from bullish momentum.
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The price has pulled back to retest the SMA, while the RSI is retesting the 50 level. Given the bullish bias, the price may soon rise to make a new high above the key resistance at 1.2650.
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